Order Code RL32795
CRS Report for Congress
Received through the CRS Web
Government-Sponsored Enterprises (GSEs):
Regulatory Reform Legislation
Updated May 26, 2005
Mark Jickling
Specialist in Public Finance
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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Government-Sponsored Enterprises:
Regulatory Reform Legislation
Summary
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs),
chartered by Congress to establish a secondary mortgage market in order to improve
the distribution of capital available for home mortgage financing. To help these
privately-owned institutions accomplish this mission, Congress granted them several
statutory benefits not available to other private companies. The advantages of GSE
status have helped the enterprises to grow very large and dominate the secondary
mortgage market.
In 1992, Congress established the Office of Federal Housing Enterprise
Oversight (OFHEO), an agency within the Department of Housing and Urban
Development (HUD), to oversee the financial safety and soundness of the enterprises.
OFHEO is authorized to set capital requirements, conduct annual risk-based
examinations, and generally enforce compliance with safety and soundness standards.
With the rapid growth of the GSEs, and major accounting scandals at Fannie
Mae and Freddie Mac, the effectiveness of the current regulatory regime has been
widely questioned. Several legislative proposals considered in the 108th and earlier
Congresses addressed GSE regulatory reform, but none was enacted. However,
adequacy of GSE regulation remains a prominent legislative issue.
While improving supervision of Fannie Mae and Freddie Mac is the major
focus, regulatory reform also involves the 12 Federal Home Loan Banks, which
comprise one collective GSE. The Federal Home Loan Banks lend to lenders —
their member banks — primarily for housing, but also for many other purposes.
Under the proposed GSE reform, they would be brought under a single regulatory
umbrella with Fannie and Freddie.
In the 109th Congress, S. 190 (Senators Hagel, Sununu, and Dole) and H.R. 1461
(Representatives Baker and Oxley) propose to restructure the GSE supervisor and
enhance its regulatory powers. (H.R. 1461 was marked up and reported by the
Financial Services Committee on May 25, 2005, with an amendment in the nature of
a substitute offered by Chairman Oxley.) Other bills are expected to be introduced.
In brief, S. 190 and H.R. 1461 would
! abolish OFHEO and establish an independent agency to oversee the
housing GSEs and the Federal Home Loan Banks;
! enhance the safety and soundness, disclosure, and enforcement tools
available to the new regulator; and
! increase the budget autonomy of the new agency by exempting its
assessments from the annual appropriations process.
This report summarizes legislative proposals in the 109th Congress that aim to
strengthen the regulation of the GSEs, and will be updated as warranted.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Table 1. Provisions of GSE Reform Legislation . . . . . . . . . . . . . . . . . . . . . . 5
Subtitle A: Improvement of Safety and Soundness Regulation . . . . . . . 5
Subtitle B: Improvement of Mission Supervision . . . . . . . . . . . . . . . 19
Subtitle C: Prompt Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . 24
Subtitle D: Enforcement Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Title II: Federal Home Loan Bank Provisions . . . . . . . . . . . . . . . . . . 32
Transition Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
List of Tables
Table 1. Provisions of GSE Reform Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The author gratefully acknowledges the work of Loretta Nott, whose CRS
Report RL32069, Improving the Effectiveness of GSE Oversight: Legislative
Proposals in the 108th Congress provides the basis for the introductory material in
this report.

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Government Sponsored Enterprises:
Regulatory Reform Legislation
Introduction
Government-sponsored enterprises (GSEs) are privately owned, congressionally
chartered financial institutions created for specific public policy purposes. They
benefit from certain exemptions and privileges, including an implied federal
guarantee,1 intended to enhance their ability to borrow money. Two of the largest
GSEs are Fannie Mae and Freddie Mac (herein referred to as the enterprises or
GSEs).2 These institutions were created by Congress to establish and maintain a
secondary mortgage market, increasing liquidity and improving the distribution of
capital available for home mortgage financing.3 To help these institutions
accomplish this mission, Congress has provided them with several benefits not
available to other financial institutions.4 These statutory benefits provide the
enterprises with lower funding costs, the ability to operate with less capital, and
lower direct costs.5 The advantages of GSE status have enabled the enterprises to
grow rapidly and become dominant players in the secondary mortgage market.
1 Although GSE bonds are not explicitly backed by the full faith and credit of the
government, market participants behave as if they were, believing that the Treasury will
never permit a GSE to default. This implicit guarantee allows the GSEs to borrow at lower
rates than private financial institutions, and to take on greater financial risk without a
corresponding drop in their credit ratings.
2 The other GSEs are the Federal Home Loan Bank System, the Farm Credit System, and
Farmer Mac. Sallie Mae, a former GSE, has been fully privatized.
3 For a detailed description of the development of the U.S. secondary mortgage market, see
Office of Federal Housing Enterprise Oversight, Report to Congress, June 2003, at
[http://www.ofheo.gov/media/pdf/WEBsiteOFHEOREPtoCongress03.pdf].
4 These statutory benefits include (1) exemption from state and local taxes, (2) a line of
credit with the U.S. Treasury up to $2.25 billion, (3) eligibility of their debt to serve as
collateral for public deposits, (4) eligibility of their securities for Federal Reserve open
market purchases, (5) eligibility for their corporate securities to be purchased without limit
by federally regulated financial institutions, (6) assignment of mortgage-related securities
they have issued or guaranteed to the second-lowest credit risk category at depository
institutions, and (7) exemption from the registration requirements of the Securities and
Exchange Commission.
5 For more information on these advantages, see the following reports: U.S. Department of
the Treasury, Government Sponsorship of the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation, July 11, 1996; U.S. Congressional Budget
Office, Assessing the Public Costs and Benefits of Fannie Mae and Freddie Mac, May 1996;
and U.S. Congressional Budget Office, Federal Subsidies and the Housing GSEs, May
2001.

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CRS-2
Congress has always been concerned that the safety and soundness of the
enterprises be maintained so that they can meet their public policy mission and not
pose risks to taxpayers. Prior to 1992, oversight was the responsibility of the
Department of Housing and Urban Development (HUD) and the Federal Home Loan
Bank Board. In 1992, Congress established the Office of Federal Housing Enterprise
Oversight (OFHEO), an independent agency within HUD, to oversee the financial
safety and soundness of the enterprises. The office is authorized to set capital
requirements, conduct annual risk-based examinations, and generally enforce
compliance with safety and soundness standards.
Since the creation of OFHEO, total assets at the GSEs have grown by more than
820% to $1.9 trillion.6 The GSEs have become two of the largest private debt issuers
in the world. At the end of 2003, outstanding debt securities of the enterprises
totaled $1.7 trillion — an amount equal to almost half of all publicly held federal
debt. In addition to enterprise debt, investors hold about $1.7 trillion in mortgage-
backed securities issued by Fannie Mae and Freddie Mac.7
As a result of the rapid growth of these institutions and their implied federal
backing, there has been an increasing concern that the enterprises may pose a
problem of systemic risk to the financial system.8 Many financial institutions around
the world hold large quantities of GSE debt and default by either GSE could have
widespread, unpredictable, and potentially serious repercussions. Accordingly,
questions have been raised about the effectiveness of the current regulatory
environment. There have been several legislative proposals introduced in the past
to address these issues, but Congress did not take action on them.
Events in the past two years, however, have brought a new urgency to this issue.
In 2003, Freddie Mac admitted that it had used improper accounting policies to create
the appearance of steady earnings growth and issued a restatement of financial
results, revising net income for 2000-2002 upwards by $5 billion.9 OFHEO imposed
a $125 million fine and is pursuing civil actions against several former Freddie
executives.
6 Based on 2003 annual reports. Fannie Mae’s accounts are in the process of restatement.
7 For more information, see Office of Federal Housing Enterprise Oversight, FY 2003-2008
Strategic Plan, Sept. 30, 2003, at [http://www.ofheo.gov/media/pdf/0308stratplan93003a.
pdf].
8 For a comprehensive analysis of these risks, see Office of Federal Housing Enterprise
Oversight, Systemic Risk: Fannie Mae, Freddie Mac, and the Role of OFHEO, Feb. 2003,
at [http://www.ofheo.gov/media/archive/docs/reports/sysrisk.pdf]. Furthermore, the
International Monetary Fund (IMF) has stated that the GSE “regulators need to look closely
at whether agencies’ capital adequacy is sufficient, especially bearing in mind the questions
about internal controls that have emerged in Freddie Mac.... [I]t is unclear whether [the
GSEs] have taken sufficient account of the risk that the market may not be deep enough to
allow them to continuously hedge their growing portfolios in times of stress.” For more
information, see IMF, Global Financial Stability Report: Market Developments and Issues,
Sept. 2003, pp. 16-22, at [http://www.imf.org/external/pubs/ft/gfsr/2003/02/index.htm].
9 For more information, see CRS Report RS21567, Accounting and Management Problems
at Freddie Mac, by Mark Jickling.

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CRS-3
Following the special examination of Freddie Mac, OFHEO began to review the
accounting policies and practices at Fannie Mae, and published its preliminary
findings in September 2004.10 OFHEO charges that Fannie Mae did not follow
generally accepted accounting practices in two critical areas: (1) amortization of
discounts, premiums, and fees involved in the purchase of home mortgages and (2)
accounting for financial derivatives contracts. According to OFHEO, these
deviations from standard accounting rules allowed Fannie Mae to reduce volatility
in reported earnings, present investors with an artificial picture of steadily growing
profits, and, in at least one case, to meet financial performance targets that triggered
the payment of bonuses to company executives.11 On December 15, 2004, the
Securities and Exchange Commission (SEC) directed Fannie Mae to restate its
accounting results since 2001 after finding inadequacies in Fannie’s accounting
policies and methodologies. Fannie Mae’s CEO and CFO stepped down soon
thereafter. These accounting scandals, and the safety and soundness concerns they
raise, have made GSE regulatory reform a prominent legislative issue once again.
While problems at Fannie Mae and Freddie Mac have provided the main
impetus for reform, the regulation of the Federal Home Loan Banks (FHLBs) may
also be affected. The 12 FHLBs comprise one collective government-sponsored
enterprise. Originally chartered by Congress to provide liquidity to the nation’s
predominant lenders for home mortgage loans — savings and loan associations and
savings banks — the FHLBs have undergone a series of changes over the years as
financial institutions have changed. Still a lender to lenders primarily for housing,
the FHLBs can now lend for many other purposes as well, and have special
responsibilities for low- and moderate-income housing, for debts incurred by the
federal government in handling deposit insurance crises of the 1970s and 1980s, and
for some community development projects.
Several bills were considered in the 108th Congress that would have restructured
OFHEO. While the proposals took somewhat different approaches to regulatory
reform, all appeared to
! abolish OFHEO and reconstitute the GSE regulator within the
Department of the Treasury, or as an independent agency;12
! increase the budget autonomy of the new office by exempting its
assessments from the annual appropriations process; and
! enhance the safety and soundness and enforcement tools available
to the new regulator.
10 Office of Federal Housing Enterprise Oversight, Report of Findings to Date: Special
Examination of Fannie Mae, Sept. 17, 2004, available at [http://www.ofheo.gov/media/
pdf/FNMfindingstodate17sept04.pdf].
11 For a discussion of OFHEO’s findings, see CRS Report RS21949, Accounting Problems
at Fannie Mae, by Mark Jickling.
12 In some versions, the new regulator was to have authority over the FHLBs, as well as
Fannie and Freddie.

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CRS-4
None of these bills, whose provisions are summarized in CRS Report RL32069,
Improving the Effectiveness of GSE Oversight: Legislative Proposals in the 108th
Congress, was enacted.
The Bush Administration has generally supported GSE regulatory reform.
Treasury Secretary John Snow appeared before the House Financial Services
Committee on September 10, 2003, and then again before the Senate Banking
Committee on October 16, 2003, to outline the Administration’s recommendations
“for the essential, minimum requirements for a credible regulator”13 for the housing
GSEs. In addition to the creation of a new agency to oversee the safety and
soundness of all the housing GSEs (Fannie Mae, Freddie Mac, and the Federal Home
Loan Banks), the Treasury Secretary outlined several recommendations intended to
strengthen the new agency’s general regulatory, supervisory and enforcement powers.
However, in testimony before the Senate Banking Committee, Federal Reserve
Board Chairman Alan Greenspan noted that “[w]orld-class regulation, by itself, may
not be sufficient and indeed, as suggested by Treasury Secretary Snow, may even
worsen the situation if market participants infer from such regulation that the
government is all the more likely to back GSE debt.”14 Concerned that this may
encourage continued asset growth in the enterprises, posing a potential risk to the
financial system, the Federal Reserve Board Chairman has repeatedly urged Congress
to consider ways to shrink the size of the GSEs’ asset portfolios.15 The bills
summarized here do not explicitly require Fannie and Freddie to reduce the size of
their portfolios, but do give the new regulator authority over the acquisition or sale
of assets under certain circumstances.
This report provides a summary of legislative proposals introduced in the 109th
Congress that aim to strengthen the regulation of the enterprises.
13 Prepared testimony of John W. Snow, Secretary of the Treasury, in: U.S. Congress, Senate
Committee on Banking, Housing and Urban Affairs, Proposals for Improving the Regulation
of the Housing GSEs, hearings, 108th Cong., 1st sess., Oct. 16, 2003, p. 2, at
[http://banking.senate.gov/_files/ACFB2.pdf].
14 Prepared testimony of Alan Greenspan in: U.S. Congress, Senate Committee on Banking,
Housing and Urban Affairs, Proposals for Improving the Regulation of the Housing
Government Sponsored Enterprises, hearings, 108th Cong., 2nd sess., Feb. 24, 2004, p. 9,
at [http://banking.senate.gov/_files/ACF1BA.pdf].
15 E.g., Alan Greenspan, Chairman, Board of Governors of the Federal Reserve System,
before the House Committee on Financial Services, Feb. 17, 2005.

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CRS-5
Table 1. Provisions of GSE Reform Legislation
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Short Title
Federal Housing Finance Reform Act of
Federal Housing Finance Reform Act of
Federal Housing Enterprise Regulatory
2005
2005
Act of 2005
Subtitle A: Improvement of Safety and Soundness Regulation.
Name of New
Federal Housing Finance Agency
Federal Housing Finance Agency
Federal Housing Enterprise Regulatory
Regulatory Agency
(Sec. 101)
(Sec. 101)
Agency (Sec. 101)
Agency Status
Independent federal agency (Sec. 101)
Independent federal agency (Sec. 101)
Independent federal agency (Sec. 101)
Jurisdiction
General supervisory and regulatory
General supervisory and regulatory
General regulatory authority over Fannie
authority over Fannie Mae, Freddie Mac,
authority over Fannie Mae, Freddie Mac,
Mae, Freddie Mac, the Federal Home
and the Federal Home Loan Banks.
the Federal Home Loan Banks, and the
Loan Banks, and the Federal Home Loan
(Sec. 101)
Federal Home Loan Bank Finance
Bank Finance Corporation. (Sec. 101)
Corporation. (Sec. 101)

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CRS-6
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Key Definitions
Fannie Mae, Freddie Mac, their affiliates,
Fannie Mae, Freddie Mac, their affiliates,
Fannie Mae, Freddie Mac, their affiliates,
and the Federal Home Loan Banks are
and the Federal Home Loan Banks are
and the Federal Home Loan Banks are
defined as “regulated entities.” The term
defined as “regulated entities.” The term
defined as “regulated entities.” (Under
“enterprise” — used frequently in H.R.
“enterprise” — used frequently in H.R.
current law, Fannie Mae and Freddie Mac
1461 — is defined in current law to mean
1461 — is defined in current law to mean
are defined as “enterprises” — many
Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac. “Regulated
provisions of S. 190 refer only to them.)
“Regulated entity-affiliated party”
entity-affiliated party” includes (1)
“Enterprise-affiliated party,” however,
includes (1) directors, officers, employees,
directors, officers, employees, agents, and
refers to directors, officers, employees,
agents, and controlling shareholders of
controlling shareholders of regulated
shareholders, consultants, partners, and
regulated entities; (2) any shareholder,
entities; (2) any shareholder, consultant,
other persons (as determined by the
consultant, joint venture partner, or other
joint venture partner, or other person (as
Director) affiliated with Fannie, Freddie,
person (as determined by the Director)
determined by the Director) that
or the Federal Home Loan Banks.
that participates in the affairs of a
participates in the affairs of a regulated
Independent contractors (such as attorneys
regulated entity; (3) independent
entity; (3) independent contractors (such as
or accountants) also meet the definition of
contractors (including attorneys,
attorneys or accountants) who knowingly
“enterprise-affiliated party” if they
appraisers, or accountants) and (4) non-
or recklessly participate in violations of law
participate in violations of law or
profits that receive principal funding, on
or regulation, breaches of fiduciary duty, or
regulation, breaches of fiduciary duty, or
an ongoing basis, from any regulated
unsafe and unsound practices that have a
unsafe and unsound practices that have a
entity. (Sec. 101)
significant adverse impact on a regulated
significant adverse impact on a regulated
entity; and (4) non-profits that receive
entity. (Sec. 101)
principal funding, on an ongoing basis,
from any regulated entity. (Sec. 101)

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CRS-7
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Agency Officials
(1) A Director, appointed by the President,
(1) A Director, appointed by the President,
(1) A Director, appointed by the President,
with the advice and consent of the Senate,
with the advice and consent of the Senate,
with the advice and consent of the Senate,
to a five-year term. (2) Deputy Directors,
to a five-year term. (2) Deputy Directors,
to a six-year term. (2) Deputy Directors,
appointed by the Director, for Divisions of
appointed by the Director, for Divisions of
appointed by the Director, for Divisions of
Enterprise Regulation, Home Loan Bank
Enterprise Regulation, Home Loan Bank
Enterprise Regulation, Home Loan Bank
Regulation, and Housing. (Sec. 101)
Regulation, and Housing. (Sec. 101)
Supervision, and Housing Mission and
Goals. (Sec. 101) An Inspector General
of the Agency. (Sec. 105)
Qualifications of
U.S. citizens, with a demonstrated
U.S. citizens, with a demonstrated
U.S. citizens, with a demonstrated
Agency Officials
understanding of financial management or
understanding of financial management or
understanding of financial management or
oversight and housing finance, with
oversight and housing finance, with
oversight and housing finance, with
additional specialized experience and
additional specialized experience and
additional specialized experience
knowledge requirements for the Deputy
knowledge requirements for the Deputy
requirements for the Deputy Director
Director positions. (Sec. 101)
Director positions. (Sec. 101)
positions. (Sec. 101)

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CRS-8
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Duties and
To oversee the prudential operations of
To oversee the prudential operations of
To oversee the prudential operations of
Authorities of the
regulated entities and to ensure that each
regulated entities and to ensure that each
regulated entities and to ensure that each
Director
entity (1) operates in a safe and sound
entity (1) operates in a safe and sound
entity (1) operates in a safe and sound
manner and maintains adequate capital
manner and maintains adequate capital and
manner and maintains adequate capital
and internal controls, (2) fosters well-
internal controls, (2) fosters well-
and internal controls, (2) fosters well-
functioning housing finance markets
functioning housing finance markets
functioning housing finance markets
(including low- and moderate-income
(including low- and moderate-income
(including low- and moderate-income
housing), (3) complies with applicable
housing), (3) complies with applicable laws
housing), (3) complies with applicable
laws and regulations, and (4) engages only
and regulations, and (4) engages only in
laws and regulations, (4) engages only in
in activities authorized by statute. The
activities authorized by statute. The
activities authorized by statute, (5) serves
Director may review and reject attempts to
Director may review and reject attempts to
the public interest, and (6) remains
acquire a controlling interest in a regulated
acquire a controlling interest in a regulated
adequately capitalized, after consideration
entity. The Director may exercise
entity. The Director may exercise
of the risk to such entity. The Director
necessary and appropriate incidental
necessary and appropriate incidental
may review and reject attempts to acquire
powers to fulfill the Agency’s duties and
powers to fulfill the Agency’s duties and
a controlling interest in a regulated entity.
responsibilities. The Director shall be a
responsibilities. (Sec. 102)
The Director may exercise necessary and
member of the Federal Financial
appropriate incidental powers to fulfill the
Institutions Examination Council.
Agency’s duties and responsibilities.
(Sec. 102)
(Sec. 102)

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CRS-9
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Prudential
The Director shall establish standards for
The Director shall establish standards for
The Director may establish standards for
Management and
each regulated entity regarding (1) internal
each regulated entity regarding (1) internal
the enterprises regarding (1) internal
Operations Standards
controls and information systems, (2)
controls and information systems, (2)
controls and information systems, (2)
internal audit systems, (3) credit and
internal audit systems, (3) credit and
internal audit systems, (3) interest rate risk
counterparty risk, (4) interest rate risk
counterparty risk, (4) interest rate risk
management, (4) monitoring and
management, (5) monitoring and
management, (5) monitoring and
management of market risk, (5) adequacy
management of market risk, (6) adequacy
management of market risk, (6) adequacy
and maintenance of liquidity and reserves,
and maintenance of liquidity and reserves,
and maintenance of liquidity and reserves,
(7) asset and portfolio growth, (8) overall
(7) asset and portfolio management, (8)
(7) asset and portfolio management, (8)
risk management, including backup
investments and acquisitions, (9) record
investments and acquisitions, (9) record
facilities to protect against disruptive
keeping, (10) issuance of subordinated
keeping, (10) issuance of subordinated
events, and (9) other standards deemed to
debt, as the Director considers necessary,
debt, as the Director considers necessary,
be appropriate. (Sec. 108)
(11) overall risk management, including
(11) overall risk management, including
backup facilities to protect against
backup facilities to protect against
disruptive events, and (12) other standards
disruptive events, and (12) other standards
the Director determines to be appropriate.
the Director determines to be appropriate.
(Sec. 102)
(Sec. 102)

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CRS-10
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Failure to Meet
If the Director finds that a regulated entity
If the Director finds that a regulated entity
No comparable provision.
Prudential Standards
has failed to meet one of the above
has failed to meet one of the above
standards, the entity shall (within 30 days)
standards, the entity shall (within 30 days)
submit a plan to correct the deficiency. If
submit a plan to correct the deficiency. If
the deficiency is not corrected, the
the deficiency is not corrected, the Director
Director may prohibit the entity from
may prohibit the entity from increasing its
increasing its total assets, may require an
total assets, may require an increase in
increase in regulatory capital, or take other
regulatory capital, or take other measures.
measures. (Sec. 102)
(Sec. 102)
Authority to Require
The Director is authorized to require
The Director is authorized to require
The Director is authorized to require
Reporting by
regulated entities to submit regular reports
regulated entities to submit regular reports
regulated entities to submit regular
Regulated Entities
on their operations and financial
on their operations and financial condition.
reports, including financial statements
condition. Regulated entities would be
(Sec. 104)
determined on a fair value basis. (Sec.
required to report in a timely manner the
104) Regulated entities would be
discovery of a purchase or sale of a
required to report in a timely manner the
fraudulent loan.
discovery of a purchase or sale of a
(Sec. 104)
fraudulent loan.
(Sec. 112)

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CRS-11
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Advisory Board
Creates the Housing Finance Oversight
Creates the Housing Finance Oversight
Creates the Federal Housing Enterprise
Board (made up of the Director, the
Board (made up of the Director, the
Board (made up of the Director, the
Secretaries of the Treasury and HUD, or
Secretaries of the Treasury and HUD, or
Secretaries of the Treasury and HUD, and
their designees, and two individuals with
their designees, and two individuals with
the Chairman of the SEC) to advise the
relevant experience appointed by the
relevant experience appointed by the
Director on overall strategies and policies.
President to 3-year terms, with the advice
President to 3-year terms, with the advice
The Board is to meet at least every 3
and consent of the Senate) to advise the
and consent of the Senate) to advise the
months, and testify to Congress annually
Director on overall strategies and policies.
Director on overall strategies and policies.
on the safety and soundness of the
The Board is to meet at least every 3
The Board is to meet at least every 3
regulated entities and the performance of
months, and testify to Congress annually
months, and testify to Congress annually on
the Agency. (Sec. 103)
on the safety and soundness, operational
the safety and soundness, operational
status, and mission performance of the
status, and mission performance of the
regulated entities, and the operations and
regulated entities, and the operations and
performance of the Agency and Board.
performance of the Agency and Board.
(Sec. 103)
(Sec. 103)

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CRS-12
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Assessments and
The Director shall establish and collect
The Director shall establish and collect
The Director shall establish and collect
Appropriations
annual assessments from the regulated
annual assessments from the regulated
annual assessments from the regulated
entities, in amounts sufficient to provide
entities, in amounts sufficient to provide
entities, in amounts sufficient to provide
for reasonable costs and expenses of the
for reasonable costs and expenses of the
for reasonable costs and expenses of the
Agency, including (1) costs of
Agency, including (1) costs of
Agency, including (1) costs of
examinations, reviews, and credit
examinations, reviews, and credit
examinations, reviews, and credit
assessments, and (2) amounts in excess of
assessments, and (2) amounts in excess of
assessments, and (2) amounts in excess of
actual expenses to maintain necessary
actual expenses to maintain necessary
actual expenses to maintain necessary
working capital. Assessments may be
working capital. Salaries and other
working capital. Salaries and other
increased if necessary to cover costs of
expenses of the Agency shall be paid from
expenses of the Agency shall be paid from
enforcement activities or if an entity is
assessments, which shall not be construed
assessments, which shall not be construed
inadequately capitalized. Salaries and
to be government funds or appropriated
to be government funds or appropriated
other expenses of the Agency shall be paid
monies. The Agency shall provide OMB
monies. (Sec. 106)
from assessments, which shall not be
with financial plans and forecasts, and be
construed to be government funds or
audited by GAO at least every 3 years.
appropriated monies. The Agency shall
(Sec. 105)
provide OMB with financial plans and
forecasts, prepare annual financial
statements (including an assertion of the
effectiveness of internal accounting
controls), and be audited annually by
GAO (at the Agency’s expense).
(Sec. 105)

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CRS-13
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Direct Hire Authority
Director may hire examiners, accountants,
Director may hire examiners, accountants,
Director may hire examiners, accountants,
specialists in technology or financial
and economists in accordance with rules
economists, and specialists in financial
markets, and economists in accordance
governing the excepted service,
markets and technology in accordance
with rules governing the excepted service,
notwithstanding any rules governing the
with rules governing the excepted service,
notwithstanding any rules governing the
competitive service. (Sec. 106)
notwithstanding any rules governing the
competitive service. (Sec. 106)
competitive service. (Sec. 105)
Prohibition and
The prohibition (in current law) of
The prohibition (in current law) of
No comparable provision
Withholding of
executive compensation that is not
executive compensation that is not
Executive
reasonable or comparable is amended by
reasonable or comparable is amended by
Compensation
permitting the Director to take into
permitting the Director to take into account
account wrongdoing on the part of the
wrongdoing on the part of the executive,
executive, and to hold pay in escrow while
and to hold pay in escrow while a
a determination is made. (Sec. 107)
determination is made. (Sec. 107)
Regulations and
The Director is authorized to issue any
The Director is authorized to issue any
The Director is authorized to issue any
Orders
regulations, guidelines, or orders that are
regulations, guidelines, or orders that are
regulations, directives, guidelines, or
necessary to carry out the authorizing
necessary to carry out the authorizing
orders that are necessary to carry out the
statutes. (Sec. 109)
statutes. (Sec. 109)
authorizing statutes. (Sec. 107)
Limits on Enterprise
The Director shall periodically review the
The Director shall periodically review the
Authorizes the Director to determine the
Assets and
on-balance sheet assets and off-balance
on-balance sheet assets and off-balance
type and amount of nonmission-related
Obligations
sheet obligations of the enterprises, and
sheet obligations of the enterprises, and
assets that an enterprise may hold at any
may order the disposition or acquisition of
may order the disposition or acquisition of
time. Any regulation issued for this
any asset or obligation, if the Director
any asset or obligation, if the Director
purpose shall include a definition of
determines that such action is consistent
determines that such action is consistent
“nonmission-related asset.” (Sec. 109)
with safe and sound operation. (Sec. 112)
with safe and sound operation. (Sec. 112)

---

CRS-14
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Risk-Based and
The Director shall, by regulation, establish
The Director shall, by regulation, establish
The Director shall, by regulation, establish
Minimum Capital
risk-based capital requirements for the
risk-based capital requirements for the
risk-based capital requirements for each
Levels
enterprises to ensure safe and sound
enterprises to ensure safe and sound
regulated entity, to ensure safe and sound
operation and maintenance of sufficient
operation and maintenance of sufficient
operation and maintenance of sufficient
capital and reserves to support risk
capital and reserves to support risk
capital and reserves to support risk
exposure. The Director shall establish
exposure. The Director shall establish
exposure. (Sec. 110)
risk-based capital requirements for the
risk-based capital requirements for the
Federal Home Loan Banks.
Federal Home Loan Banks.
Confidentiality of information enabling
(Sec. 110)
risk-based capital standards shall be
maintained.
(Sec. 110)
Minimum and
The Director may, by regulation, establish
The Director may, by regulation, establish
With regard to the enterprises (Fannie and
Critical Capital
minimum capital levels for regulated
minimum capital levels for regulated
Freddie), the Director may establish
Levels
entities that are higher than the statutory
entities that are higher than the statutory
minimum capital levels that are higher
levels. The Director may, by order or
levels. The Director may, by order or
than those specified in the statute.
regulation, establish a capital or reserve
regulation, establish a capital or reserve
(Sec. 110)
requirement with respect to a particular
requirement with respect to a particular
program or activity, to ensure that the
program or activity, to ensure that the
entity operates in a safe and sound
entity operates in a safe and sound manner.
manner. The Director shall, by regulation,
The Director shall, by regulation, establish
establish a critical capital level for the
a critical capital level for the Home Loan
Home Loan Banks. (Sec. 111)
Banks. (Sec. 111)

---

CRS-15
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
SEC Registration
Requires each regulated entity to register
Requires each regulated entity to register at
Requires each regulated entity to register
Requirements
at least one class of capital stock with the
least one class of capital stock with the
at least one class of capital stock with the
SEC, and requires enterprises (Fannie and
SEC, and requires enterprises (Fannie and
SEC, and requires enterprises (Fannie and
Freddie) to comply with Sections 14 and
Freddie) to comply with Sections 14 and 16
Freddie) to comply with Sections 14 and
16 of the Securities Exchange Act of 1934
of the Securities Exchange Act of 1934
16 of the Securities Exchange Act of
(which deal with proxy reporting and
(which deal with proxy reporting and
1934, which deal with proxy reporting and
disclosure of insider transactions in
disclosure of insider transactions in
disclosure of insider transactions in
company stock). Enterprises whose stock
company stock). Enterprises whose stock
company stock. (Sec. 110) Sec. 205 (see
is not registered or is deregistered remain
is not registered or is deregistered remain
below) exempts the Federal Home Loan
subject to certain provisions of the
subject to certain provisions of the
Banks from several provisions of
Securities Exchange Act. (Sec. 114)
Securities Exchange Act. (Sec. 110)
securities law.
Corporate
Requires a majority of the board to be
Limits board tenure to ten years, and
No comparable provision
Governance of
independent directors, as defined by the
membership to those under 72 years of age.
Enterprises
NYSE. Requires boards to meet at least
Requires a majority of the board to be
eight times a year, and requires non-
independent directors, as defined by the
management directors to meet regularly in
NYSE. Requires boards to meet at least
executive session without management
eight times a year, and requires non-
participation. (Sec. 113)
management directors to meet regularly in
executive session without management
participation. (Sec. 113)

---

CRS-16
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Compensation by
Compensation of directors, executives,
The compensation of directors, officers,
No comparable provision
Enterprises
and employees shall not exceed what is
and employees of an enterprise shall not be
reasonable and appropriate, shall be
in excess of what is reasonable and
commensurate with duties and
appropriate, shall be commensurate with
responsibilities, consistent with the long-
duties and responsibilities, consistent with
term goals of the enterprise, shall not
the enterprise’s long-term goals, and shall
focus solely on earnings performance.
not focus solely on earnings performance
Enterprises are made subject to Section
(but shall also take into account risk
304 of the Sarbanes-Oxley Act, which
management, operational stability, and
requires CEOs and CFOs to reimburse the
legal and regulatory compliance).
company under certain circumstances after
(Sec. 113)
an accounting restatement. (Sec. 113)
Code of Conduct and
An enterprise shall establish and enforce a
An enterprise shall establish and enforce a
No comparable provision
Ethics
written code of conduct designed to ensure
written code of conduct designed to ensure
that directors, officers, and employees act
that directors, officers, and employees act
in an impartial and objective manner,
in an impartial and objective manner,
including standards under section 406 of
including standards under section 406 of
the Sarbanes-Oxley Act. (Sec. 113)
the Sarbanes-Oxley Act. (Sec. 113)

---

CRS-17
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Responsibilities of
The board of an enterprise shall oversee
The board of an enterprise shall oversee (1)
No comparable provision
the Board of
(1) corporate strategy, risk policy, and
corporate strategy, risk policy, and
Directors
compliance programs, (2) hiring and
compliance programs, (2) hiring and
retention of qualified executives, (3)
retention of qualified executives, (3)
compensation programs, (4) the integrity
compensation programs, (4) the integrity of
of accounting and financial reporting
accounting and financial reporting systems,
systems, (5) disclosures to shareholders
(5) disclosures to shareholders and
and investors, (6) extensions of credit to
investors, (6) extensions of credit to
officers and directors, and (7)
officers and directors, and (7)
responsiveness in reporting to federal
responsiveness in reporting to federal
regulators. (Sec. 113)
regulators. (Sec. 113)
Prohibition of
An enterprise may not (directly, indirectly,
An enterprise may not (directly, indirectly,
No comparable provision
Extensions of Credit
or through a subsidiary) make any
or through a subsidiary) make any personal
personal loan to a board member or
loan to a board member or executive
executive officer. (Sec. 113)
officer. (Sec. 113)
Certification of
The CEO and CFO of an enterprise shall
The CEO and CFO of an enterprise shall
No comparable provision
Disclosures
review annual and quarterly reports and
review annual and quarterly reports and
shall make the certifications required by
shall make the certifications required by
section 302 of the Sarbanes-Oxley Act.
section 302 of the Sarbanes-Oxley Act.
(Sec. 113)
(Sec. 113)
Change of Audit
Requires that the lead partner of the
Requires that the lead partner of the
No comparable provision
Partner
external auditor of an enterprise be
external auditor of an enterprise be changed
changed every five years. (Sec. 113)
every five years. (Sec. 113)

---

CRS-18
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Compliance Program
Each enterprise shall establish a
Each enterprise shall establish a
No comparable provision
compliance program reasonably designed
compliance program reasonably designed
to ensure that the enterprise complies with
to ensure that the enterprise complies with
applicable laws, regulations, and internal
applicable laws, regulations, and internal
controls. The program shall be headed by
controls. The program shall be headed by a
a compliance officer, who reports directly
compliance officer, who reports directly to
to the CEO and regularly to the board.
the CEO and regularly to the board.
(Sec. 113)
(Sec. 113)
Risk Management
Each enterprise shall establish a risk
Each enterprise shall establish a risk
No comparable provision
Program
management program reasonably designed
management program reasonably designed
to manage the risks of operation. The
to manage the risks of operation. The
program shall be headed by a risk
program shall be headed by a risk
management officer, who reports directly
management officer, who reports directly
to the CEO and regularly to the board.
to the CEO and regularly to the board.
(Sec. 113)
(Sec. 113)
Restrictions on
No comparable provision, but such
No comparable provision, but such
The Agency may prohibit or limit, by
Certain Golden
payments could be subject to the
payments could be subject to the
regulation or order, any golden parachute
Parachute Payments
“reasonable and appropriate” tests in
“reasonable and appropriate” tests in
or indemnification payment that would be
Section 113(c).
Section 113(c).
received by any enterprise-affiliated party
after an enterprise became insolvent, was
determined to be in a troubled condition,
or following the appointment of a
conservator or receiver. (Sec. 111)

---

CRS-19
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Reporting of
No comparable provision
No comparable provision
The Director shall, by regulation, require
Fraudulent Loans
enterprises to timely disclose the
discovery of the purchase or sale of a
fraudulent loan. (Sec. 112)
Subtitle B: Improvement of Mission Supervision.
Affordable Housing
Program and housing goal oversight is
Program and housing goal oversight is
Oversight of affordable housing goals is
Goals
transferred from HUD to the Agency.
transferred from HUD to the Agency.
transferred from Secretary of HUD to the
(Sec. 121)
(Sec. 121)
Director. HUD retains fair housing
responsibilities. (Secs. 124-126) The
Inspector General of the Agency shall
conduct an annual audit of affordable
housing programs. (Sec. 402)

---

CRS-20
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Prior Approval of
Enterprises may not undertake new
Enterprises may not commence new
Prior approval authority is transferred
New Business
programs or business activities without the
programs or business activities without the
from HUD to the Director. (Sec. 121)
Activities by
Director’s prior approval. Approval is
Director’s prior approval. Approval is
Authorizes the Director to review any
Enterprises
contingent upon consistency with statutory
contingent upon consistency with statutory
enterprise activities, to determine their
authority, safety and soundness, and the
authority, safety and soundness, and the
conformance with the purposes of the
public interest. The Director may prohibit
public interest. The Director may prohibit
statutes, and to protect the safety and
any activity that is inconsistent with the
any activity that is inconsistent with the
soundness of the enterprises. The Director
law, otherwise inconsistent with safety
law, otherwise inconsistent with safety and
may prohibit or limit any activities found
and soundness, or not in the public
soundness, or not in the public interest.
to be impermissible or inappropriate.
interest. Requires enterprises to submit a
Requires enterprises to submit a report to
(Sec. 122)
report to the director describing each
the director describing each program and
program and business activity within 180
business activity within 180 days of
days of enactment. (Sec. 122)
enactment. (Sec. 122)
Mission Clarification
Within 6 months of the effective date of
Within 6 months of the effective date of
The Director shall define by regulation
this legislation, the Director shall, by
this legislation, the Director shall, by
“loan origination,” establishing thereby
regulation, define “primary mortgage
regulation, define “primary mortgage
which activities are impermissible for the
market” and “secondary mortgage
market” and “secondary mortgage market.”
enterprises. The Director shall define the
market.” (Sec. 122)
(Sec. 122)
boundary between the secondary mortgage
market (where the enterprises are allowed
to operate) and the primary mortgage
market (where they are not).
Grandfathering of enterprise activities that
do not accord with these definitions is not
automatically presumed, but may be
permitted by the Director. (Sec. 107)

---

CRS-21
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Conforming Loan
Sets conforming loan limits and requires
Sets conforming loan limits and requires
No comparable provision
Limits
the Agency to make annual adjustments to
the Agency to make annual adjustments to
the limits based on increases or decreases
the limits based on increases or decreases
in a housing price index maintained by the
in a housing price index maintained by the
Agency. The accuracy of the housing
Agency. The accuracy of the housing price
price index is to be audited by GAO. For
index is to be audited by GAO. (Sec. 123)
high-cost metropolitan statistical areas, the
conforming loan limit is raised to the
lesser of 150% of the statutory limit or the
median home price in that area. (Sec. 123)
Annual Housing
The Director shall report annually to the
The Director shall report annually to the
No comparable provision
Report
House Financial Services and Senate
House Financial Services and Senate
Banking Committees on the achievement
Banking Committees on the achievement of
of housing goals, actions to promote or
housing goals, actions to promote or
expand goals, to expand opportunities for
expand goals, to expand opportunities for
first-time home buyers, fair housing
first-time home buyers, fair housing issues,
issues, and conditions in housing markets.
and on conditions in housing markets. To
To assist in the preparation of this report,
assist in the preparation of this report, the
the Director shall conduct a monthly
Director shall conduct a monthly survey of
survey of housing markets. (Sec. 124)
housing markets. (Sec. 124)

---

CRS-22
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Establishment of
The Director shall establish goals, with
The Director shall establish housing goals
No comparable provisions
Housing Goals and
annual targets, for the purchases of
for each enterprise, including low- and
Home Purchase Goal
mortgage loans made to low and very low
moderate-income housing goals, affordable
income families, or families in low
housing goals, underserved area goals, and
income areas. Annual goals shall also be
home purchase goals.
established for purchases of mortgages on
(Sec. 125)
multifamily housing units serving very
The Director shall establish a home
low income families, or units assisted by
purchase goal for each enterprise for
the low-income housing tax credit.
mortgages including the following: first-
(Sec. 125)
time buyers, low- and moderate-income
Creates a duty to serve underserved
buyers, buyers in underserved areas, and
markets, by undertaking activities related
buyers of special affordable housing.
to mortgages on housing for low, very
(Sec. 126)
low, and moderate income familes,
including manufactured housing.
(Sec. 126)

---

CRS-23
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Monitoring and
Upon a written finding that an enterprise
Upon a written finding that an enterprise
No comparable provision
Enforcing Housing
has failed to meet a housing goal, the
has failed to meet a housing goal, the
Goal Compliance
Director is authorized to take any of
Director is authorized to take any of several
several steps to enforce compliance,
steps to enforce compliance, including
including cease-and-desist orders, refusal
cease-and-desist orders, refusal to authorize
to authorize new programs, and civil
new programs, and civil money penalties
money penalties not to exceed $50,000 per
not to exceed $50,000 per day. Other
day. Other sanctions may include a
sanctions may include a prohibition on new
prohibition on new activities or programs.
activities or programs. (Sec. 128)
(Sec. 127)
Affordable Housing
Each enterprise shall establish an
No comparable provision
No comparable provision
Fund
affordable housing fund to increase
homeownership among very- and
extremely-low income families, to
increase investment in housing in low
income and economically distressed areas,
and to increase and preserve the supply of
rental and owner-occupied housing for
very- and extremely-low income families.
Each enterprise shall allocate to this fund
3.5% of its after-tax income during the
first year after enactment, and 5% in
subsequent years. No allocation would be
required when an enterprise was less than
adequately capitalized. (Sec. 128)

---

CRS-24
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Affordable Housing
The Director shall appoint an affordable
No comparable provision
No comparable provision
Board
housing board, whose members shall
include the Secretaries of HUD and
Agriculture (or their designees), and 2
persons each from (1) businesses and (2)
non-profits actively engaged in promoting
or providing housing for very- or
extremely-low income households. The
board shall determine very- and
extremely-low income housing needs and
advise the director on priorities for the use
of the affordable housing funds.
(Sec. 128)
Subtitle C: Prompt Corrective Action.
Capital
The Director may reclassify a regulated
The Director may reclassify a regulated
The Director may reclassify a regulated
Classifications
entity (1) whose conduct could rapidly
entity (1) whose conduct could rapidly
entity whose conduct could rapidly deplete
deplete core or total capital, or (in the case
deplete core or total capital, or (in the case
core capital, or whose mortgage assets
of an enterprise) whose mortgage assets
of an enterprise) whose mortgage assets
have declined significantly in value, or
have declined significantly in value, or (2)
have declined significantly in value, or (2)
which is determined (after notice and
which is determined (after notice and
which is determined (after notice and
opportunity for a hearing) to be in an
opportunity for a hearing) to be in an
opportunity for a hearing) to be in an
unsafe or unsound condition. (Sec. 141)
unsafe or unsound condition. (Sec. 141)
unsafe or unsound condition. (Sec. 141)

---

CRS-25
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Restriction on
A regulated entity shall make no capital
A regulated entity shall make no capital
A regulated entity shall make no capital
Capital Distributions
distribution that would cause it to become
distribution that would cause it to become
distribution that would cause it to become
undercapitalized, except as permitted by
undercapitalized, except as permitted by
undercapitalized, except as permitted by
the Director under certain circumstances.
the Director under certain circumstances.
the Director under certain circumstances.
(Sec. 141)
(Sec. 141)
(Sec. 141)
Supervisory Actions
The Director must monitor the entity’s
The Director must monitor the entity’s
The Director must monitor the entity’s
Applicable to
condition, its compliance with its capital
condition, its compliance with its capital
condition, its compliance with its capital
Undercapitalized
restoration plan, and the efficacy of the
restoration plan, and the efficacy of the
restoration plan, and the efficacy of the
Regulated Entities
plan. No growth in total assets is
plan. No growth in total assets is permitted
plan. No growth in total assets is
permitted for an undercapitalized GSE,
for an undercapitalized GSE, unless the
permitted for an undercapitalized GSE,
unless the director has accepted the GSE’s
director has accepted the GSE’s capital
unless the director has accepted the GSE’s
capital restoration plan, an increase in
restoration plan, an increase in assets is
capital restoration plan, an increase in
assets is consistent with the plan, and the
consistent with the plan, and the ratio of
assets is consistent with the plan, and the
ratio of tangible equity to assets is
tangible equity to assets is increasing. No
ratio of tangible equity to assets is
increasing. No new activities or
new activities or acquisitions permitted
increasing. No new activities or
acquisitions permitted without the
without the Director’s prior approval and
acquisitions permitted without the
Director’s prior approval and
determination that such activities would be
Director’s prior approval and
determination that such activities would
consistent with the capital restoration plan.
determination that such activities would
be consistent with the capital restoration
Actions that may be taken under current
be consistent with the capital restoration
plan. Actions that may be taken under
law with regard to significantly
plan. Actions that may be taken under
current law with regard to significantly
undercapitalized GSEs may be taken with
current law with regard to significantly
undercapitalized GSEs may be taken with
regard to undercapitalized GSEs.
undercapitalized GSEs may be taken with
regard to undercapitalized GSEs.
(Sec. 142)
regard to undercapitalized GSEs.
(Sec. 142)
(Sec. 142)

---

CRS-26
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Supervisory Actions
Supervisory actions that regulator may
Supervisory actions that regulator may take
Supervisory actions that regulator may
Applicable to
take under current law must be taken,
under current law must be taken, including
take under current law must be taken,
Significantly
including one or more of the following:
one or more of the following: new election
including one or more of the following:
Undercapitalized
new election of directors, dismissal of
of directors, dismissal of directors and/or
new election of directors, dismissal of
Regulated Entities
directors and/or executives, and hiring of
executives, and hiring of qualified
directors and/or executives, and hiring of
qualified executive officers, or other
executive officers, or other actions.
qualified executive officers, or other
actions. Without prior written approval of
Without prior written approval of the
actions. Without prior written approval of
the Director, executives of a significantly
Director, executives of a significantly
the Director, executives of a significantly
undercapitalized GSE may not receive
undercapitalized GSE may not receive
undercapitalized GSE may not receive
bonuses or pay raises. (Sec. 143)
bonuses or pay raises. (Sec. 143)
bonuses or pay raises. (Sec. 143)
Authority Over
The Director may appoint (or the Agency
The Director may appoint (or the Agency
The Director may appoint (or the Agency
Critically
may serve as) a receiver or conservator for
may serve as) a receiver or conservator for
may serve as) a receiver or conservator for
Undercapitalized
several specified causes related to
several specified causes related to financial
several specified causes related to
Enterprises
financial difficulty and/or violations of
difficulty and/or violations of law or
financial difficulty and/or violations of
(Liquidation
law or regulation. Sets out powers of
regulation. Sets out powers of conservators
law or regulation. Sets out powers of
Authority)
conservators or receivers, and procedures
or receivers, and procedures for settlement
conservators or receivers, and procedures
for settlement of claims and other aspects
of claims and other aspects of liquidation.
for settlement of claims and other aspects
of liquidation. Authorizes the Director to
Authorizes the Director to appoint a
of liquidation. Authorizes the Director to
appoint a limited-life enterprise to deal
limited-life enterprise to deal with the
appoint a limited-life enterprise to deal
with the affairs of an enterprise in default.
affairs of an enterprise in default. Prohibits
with the affairs of an enterprise in default.
Prohibits a receiver from terminating or
a receiver from terminating or revoking the
Prohibits a receiver from terminating or
revoking the charter of an enterprise.
charter of an enterprise.
revoking the charter of an enterprise.
(Sec. 144)
(Sec. 144)
(Sec. 144)

---

CRS-27
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Subtitle D: Enforcement Actions.
Cease-and-Desist
The Director may issue cease-and-desist
The Director may issue cease-and-desist
The Director may issue cease-and-desist
Orders
orders against a regulated entity, a
orders against a regulated entity, a
orders against a regulated entity, an entity-
regulated entity-affiliated party, or the
regulated entity-affiliated party, or the
affiliated party, or the Federal Home Loan
Federal Home Loan Bank Finance
Federal Home Loan Bank Finance
Bank Finance Corporation (created by
Corporation (created by Sec. 204) for
Corporation (created by Sec. 204) for
Sec. 204) for unsafe or unsound practices
unsafe or unsound practices (actual or
unsafe or unsound practices (actual or
(actual or imminent), violations of laws
imminent), violations of laws and
imminent), violations of laws and
and regulations, or for a less-than-
regulations, or for a less-than-satisfactory
regulations, or for a less-than-satisfactory
satisfactory rating where the identified
rating where the identified deficiency is
rating where the identified deficiency is not
deficiency is not corrected. (Sec. 151)
not corrected. (Sec. 161)
corrected. (Sec. 161)
Temporary cease-and-desist orders may be
Temporary cease-and-desist orders may be
Temporary cease-and-desist orders may be
issued if actions taken (or not taken) by
issued if actions taken (or not taken) by
issued if actions taken (or not taken) by the
the regulated entity are likely to cause
the regulated entity are likely to cause
regulated entity are likely to cause
insolvency or weaken its financial
insolvency or weaken its financial
insolvency or weaken its financial
condition prior to the conclusion of a
condition prior to the conclusion of a
condition prior to the conclusion of a cease-
cease-and-desist proceeding. (Sec. 152)
cease-and-desist proceeding. (Sec. 162)
and-desist proceeding. (Sec. 162)

---

CRS-28
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Removal and
After written notice and opportunity for a
After written notice and opportunity for a
After written notice and opportunity for a
Prohibition Authority
hearing, the Director may suspend or
hearing, the Director may suspend or
hearing, the Director may suspend or
remove regulated entity-affiliated parties
remove regulated entity-affiliated parties
remove enterprise-affiliated parties, or
who have (1) violated a law or a cease-
who have (1) violated a law or a cease-and-
officers of the Federal Home Loan Bank
and-desist or other written order, (2)
desist or other written order, (2) engaged in
Finance Corporation, who have (1)
engaged in an unsafe or unsound practice,
an unsafe or unsound practice, or (3)
violated a law or a cease-and-desist or
or (3) breached fiduciary duty, such that
breached fiduciary duty, such that (1) the
other written order, (2) engaged in an
(1) the regulated entity is likely to suffer
regulated entity is likely to suffer loss or
unsafe or unsound practice, or 3) breached
loss or the enterprise affiliated party gain,
the enterprise affiliated party gain, and (2)
fiduciary duty, such that (1) the regulated
and (2) the unsafe or unsound practice
the unsafe or unsound practice involves
entity is likely to suffer loss or the
involves personal dishonesty or
personal dishonesty or demonstrates willful
enterprise affiliated party gain, and (2) the
demonstrates willful and continuing
and continuing disregard for the safety and
unsafe or unsound practice demonstrates
disregard for the safety and soundness of
soundness of the regulated entity. Also
continuing disregard for the safety and
the regulated entity. Also provides for
provides for industry-wide suspensions
soundness of the regulated entity. Also
industry-wide suspensions under certain
under certain circumstances. Provides for
provides for industry-wide suspensions
circumstances. Provides for judicial
judicial review of such orders or
under certain circumstances. Provides for
review of such orders or suspensions.
suspensions. (Sec. 165)
judicial review of such orders or
(Sec. 166)
suspensions. (Sec. 153)
Enforcement and
Authorizes the Director to apply to
Authorizes the Director to apply to Federal
Authorizes the Director to apply to
Jurisdiction
Federal District Court for enforcement of
District Court for enforcement of
Federal District Court for enforcement of
outstanding notice or order, and to request
outstanding notice or order, and to request
outstanding orders or subpoenas, and to
the Attorney General to bring actions for
the Attorney General to bring actions for
request the Attorney General to bring
that purpose. (Sec. 164)
that purpose. (Sec. 164)
actions for that purpose. (Sec. 154)

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CRS-29
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Civil Money
Establishes three tiers of fines: (1)
Establishes three tiers of fines: (1) $10,000
Establishes three tiers of fines: (1)
Penalties
$10,000 per day for violations of orders,
per day for violations of orders, etc., (2)
$10,000 per day for violations of orders,
etc., (2) $50,000 per day for recklessly
$50,000 per day for recklessly engaging in
etc., (2) $50,000 per day for a pattern of
engaging in an unsafe or unsound practice,
an unsafe or unsound practice, or a pattern
misconduct or material breach of fiduciary
or a pattern of misconduct or material
of misconduct or material breach of
duty with financial gain to the entity or
breach of fiduciary duty with financial
fiduciary duty with financial gain to the
individual, and (3) up to a maximum of $2
gain to the entity or individual, and (3) up
entity or individual, and (3) up to a
million for knowingly engaging in
to a maximum of $2 million per day for
maximum of $2 million per day for
violations, breaches of fiduciary duties, or
knowingly engaging in violations,
knowingly engaging in violations, breaches
unsafe or unsound practices that cause
breaches of fiduciary duties, or unsafe or
of fiduciary duties, or unsafe or unsound
substantial losses to a regulated entity.
unsound practices that cause substantial
practices that cause substantial losses to a
(Sec. 155)
losses to a regulated entity. (Sec. 165)
regulated entity. (Sec. 164)
Criminal Penalties
Anyone who participates directly or
Anyone who participates directly or
Anyone who participates directly or
indirectly in the affairs of a regulated
indirectly in the affairs of a regulated entity
indirectly in the affairs of a regulated
entity while under suspension or order of
while under suspension or order of removal
entity while under suspension or order of
removal shall be liable for a fine of up to
shall be liable for a fine of up to $1 million,
removal shall be liable for a fine of up to
$1 million, or five years imprisonment.
or five years imprisonment. (Sec. 166)
$1 million, or five years imprisonment.
(Sec. 167)
(Sec. 156)

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CRS-30
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Studies and Reports
In addition to the study in Section 182
The Director shall report to Congress
(1) The Agency and federal bank
Required
(described to the right), the reported bill
(within 12 months of the effective date of
regulators shall report to Congress on
calls for (1) a study by the Director of the
this legislation) on (1) the portfolio
holdings of GSE debt by insured
effect that restrictions on conforming loan
holdings of the enterprises, (2) the risk
depository institutions and whether such
limits have on mortgage markets; (2) a
implications of the portfolios, including the
holdings are a source of systemic risk.
study on guarantee fees by the
use of derivatives as hedging instruments,
(2) The Director, in consultation with
Comptroller General in consultation with
(3) the safety and soundness implications
GAO, shall report to Congress on GSE
the federal banking agencies and the new
of portfolio holdings, (4) whether the
portfolio operations, risk management,
director of the FHFA; (3) a review by the
portfolio holdings further the enterprise
and mission. (3) The Director shall report
GSEs of disparities in interest rates
missions, and (5) the systemic risk
to Congress on the appropriate level of
charged on mortgages for minority
implications of portfolio holdings, and
debt issuance by GSEs. (4) The Director
borrowers; (4) an affordable housing study
whether such holdings should be reduced
shall submit a quarterly report to Congress
related to long-term-care facilities; and
over time. (Sec. 182)
on the risk-based capital levels for the
(5) a study of alternative secondary
enterprises. (5) The GAO shall submit an
mortgage markets systems, such as
annual report to Congress, with
privatization or competition from new
recommendations, on the allocation of
GSEs.
resources within the Agency and the level
of assessments collected from the
regulated entities. (Sec. 161)
(6) The Federal Reserve shall study and
report to Congress on the effects of the
Basel II Capital Accord. (Sec. 401)

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CRS-31
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
End of Presidential
Eliminates the requirement that five
Eliminates the requirement that five
Abolishes the requirement that five
Appointment of
directors on the boards of Fannie Mae and
directors on the boards of Fannie Mae and
directors on the boards of Fannie Mae and
Enterprise Directors
Freddie Mac be appointed by the
Freddie Mac be appointed by the President.
Freddie Mac be appointed by the
President. Reduces the size of enterprise
(Sec. 181)
President. (Sec. 172)
boards from 18 to between 7 and 15.
(Sec. 181)

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CRS-32
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Title II: Federal Home Loan Bank Provisions.
Boards of Directors
Provides that boards of FHLBs shall
Provides that boards of Federal Home Loan
Provides that all directors of Federal
contain 13 members, or such number as
Banks shall contain 13 (rather than the
Home Loan Banks shall be elected by the
the Director determines, all of whom shall
present 14) members, all of whom shall be
membership. The 13-member boards shall
be U.S. citizens and elected by the
elected by the membership (none
include (1) member directors — officers
membership (none appointed). A majority
appointed). The boards shall include
or directors of member banks located in
of each board shall consist of member
member directors — officers or directors of
the bank district — and (2) nonmember
directors — officers or directors of
member banks located in the bank district
directors, who shall be residents of the
member banks located in the FHLB
— and nonmember directors, who shall be
bank district, and who shall include at
district. At least one-third of the members
residents of the bank district, and at least
least two representatives of consumer or
shall be independent directors: bona fide
two of whom are representatives of
community interests. Directors’ terms are
residents of the bank district, at least two
consumer or community interests. The cap
extended from three to four years.
of whom represent consumer or
on director compensation is lifted, but
(Sec. 201)
community interests. The remaining
compensation must be reasonable and
independent directors shall have financial
appropriate. Directors’ terms are set at four
or management expertise. Independent
(rather than three) years. (Sec. 202)
directors may not serve as officers of a
FHLB or a member bank. Terms of
service are set at four (rather than three)
years. The cap on director compensation
is lifted, but compensation must be
reasonable and appropriate. (Sec. 202)

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CRS-33
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Debt Issuing Facility
No directly comparable provision, but
Establishes a Federal Home Loan Bank
Establishes a Federal Home Loan Bank
permits two or more FHLBs to establish a
Finance Corporation (as a jointly owned
Finance Corporation (as a jointly owned
joint office to provide services to Banks
subsidiary of the Federal Home Loan
subsidiary of the Federal Home Loan
on a common or collective basis. The
Banks) to issue and service debt
Banks) to issue and service debt
FHLBs may require the Office of Finance
obligations, to act as fiscal agent, and to
obligations, to act as fiscal agent, and to
to provide such services as the banks are
perform other functions currently
perform other functions now performed by
authorized to perform or provide
performed by the Office of Finance.
the Office of Finance. Provides for a
individually. (Sec. 204)
Provides for a governing Board of
governing Board of Directors, comprising
Directors, comprising the presidents of the
the presidents of the Federal Home Loan
Federal Home Loan Banks, and sets out the
Banks, and sets out the Board’s duties and
Board’s duties and powers. (Sec. 204)
powers. (Sec. 204)
FHLB Mergers and
Permits voluntary mergers between
No comparable provision
No comparable provision
Reorganization
FHLBs, subject to the approval and
regulation of the Director. (Sec. 206)
Community
Insured depository institutions with less
Insured depository institutions with less
No comparable provision
Financial Institution
than $1 billion in assets may use Federal
than $1 billion in assets may use Federal
Members
Home Loan Bank advances for lending to
Home Loan Bank advances for lending to
community development activities, and
community development activities, and use
use such secured loans as collateral for
such secured loans as collateral for
advances generally. (Sec. 208)
advances generally. (Sec. 206)

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CRS-34
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Exemption from
Exempts the Federal Home Loan Banks
Exempts the Federal Home Loan Banks
Exempts the Federal Home Loan Banks
Certain SEC
from certain disclosure requirements with
from certain disclosure requirements with
from certain disclosure requirements with
Reporting
regard to transactions involving capital
regard to transactions involving capital
regard to transactions involving capital
Requirements
stock of the banks. Shares of Federal
stock of the banks. Shares of Federal
stock of the banks. Shares of Federal
Home Loan Bank capital stock are defined
Home Loan Bank capital stock are defined
Home Loan Bank capital stock are defined
as “exempted securities.” Debentures,
as “exempted securities.” Debentures,
as “exempted securities.” Debentures,
bonds, and other FHLB debt obligations
bonds, and other FHLB debt obligations are
bonds, and other debt obligations are
are defined as “exempted securities” and
defined as “exempted securities” and
defined as “exempted securities” and
“government securities.” A person that
“government securities.” A person that
“government securities.” A person that
effects transactions in Federal Home Loan
effects transactions in Federal Home Loan
effects transactions in Federal Home Loan
Bank capital stock or other obligations is
Bank capital stock or other obligations is
Bank capital stock or other obligations is
excluded from the definition of
excluded from the definition of
excluded from the definition of
“government securities dealer.” The
“government securities dealer.” The
“government securities dealer.” The
Federal Home Loan Banks shall be
Federal Home Loan Banks shall be exempt
Federal Home Loan Banks shall be
exempt from reporting requirements
from reporting requirements regarding
exempt from reporting requirements
regarding related party transactions and
related party transactions and sale of
regarding related party transactions and
sale of unregistered securities. Tender
unregistered securities. Tender offer rules
sale of unregistered securities. Tender
offer rules shall not apply to transactions
shall not apply to transactions in Federal
offer rules shall not apply to transactions
in Federal Home Loan Bank capital stock.
Home Loan Bank capital stock.
in Federal Home Loan Bank capital stock.
(Sec. 207)
(Sec. 205)
(Sec. 205)

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CRS-35
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Limitations on
No comparable provision
No comparable provision
The Agency may prohibit or limit, by
Golden Parachutes
regulation or order, any golden parachute
or indemnification payment that would be
received by any affiliated party when there
is a reasonable basis to believe that the
party may have committed fraud or breach
of fiduciary duty that had a material
impact on the bank’s financial condition,
or where there is a reasonable basis to
believe that the party was substantially
responsible for the bank’s insolvency,
troubled condition, or for the appointment
of a conservator or receiver, and other
factors. (As in Sec. 111, “golden
parachute” is defined as a post-
employment payment that would be
received by any enterprise-affiliated party
after an enterprise had become insolvent,
had been determined to be in a troubled
condition, or following the appointment of
a conservator or receiver.)
(Sec. 206)

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CRS-36
Provision
H.R. 1461 (as reported)
H.R. 1461 (as introduced)
S. 190
Transition Provisions.
Abolishment of
Various provisions dealing with abolition
Various provisions dealing with abolition
Various provisions dealing with abolition
OFHEO and the
of OFHEO and the FHFB, continuation of
of OFHEO and the FHFB, continuation of
of OFHEO and the FHFB, continuation of
Federal Housing
certain regulations, transfer of property
certain regulations, transfer of property and
certain regulations, transfer of property
Finance Board
and facilities, employee rights and
facilities, employee rights and benefits, etc.
and facilities, employee rights and
benefits, etc. (Title III)
(Title III)
benefits, etc. (Title III)
Effective Date
One year after the date of enactment,
One year after the date of enactment, unless
The date of enactment, except as
unless otherwise specified.
otherwise specified.
specifically provided otherwise.
(Secs. 184 and 210)
(Sec. 184)
(Sec. 173)

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