12 U.S. Code § 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—
(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—
(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
(B) Qualifying insured System bank
For purposes of subparagraph (A), the term “qualifying insured System bank” means any insured System bank that—
(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.
(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—
(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—
(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.
Any assistance provided under this subsection may be in subordination to the rights of owners of obligations and other creditors.
(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.
(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.
(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—
(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
(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.
Source(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.)
1996—Subsec. (a)(1). Pub. L. 104–105, § 217(b)(1), substituted “Stand-alone assistance” for “In general” in par. heading.
Subsec. (a)(2). Pub. L. 104–105, § 217(b)(2)(A), substituted “Facilitation of mergers or consolidation” for “Enumerated powers” in par. heading.
Subsec. (a)(2)(A). Pub. L. 104–105, § 217(b)(2)(B), substituted “In general” for “Facilitation of mergers or consolidation” in subpar. heading.
Subsec. (a)(3)(A). Pub. L. 104–105, § 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, § 217(a), added subpars. (B) to (E) and redesignated former subpar. (B) as (F).
1990—Subsec. (f). Pub. L. 101–624substituted “prior to January 1, 1993” for “beginning on the date of the enactment of this part”.
1989—Subsec. (e). Pub. L. 101–220inserted “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. 101–220effective 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) ofPub. L. 101–220, set out as a note under section 2020 of this title.