Reliable Economic Stabilization, Capital Utilization, and Enterprise Reform Act of 2008 - Amends the Internal Revenue Code to: (1) exclude from gross income gain from the sale of certain residential or commercial mortgages and related securities issued on or before March 14, 2008, and acquired before January 1, 2010; (2) extend the carryback period for net operating losses to five years; (3) provide an increased dividends received tax deduction for corporations with overseas operations that make investments in the United States; and (4) treat gain or loss from the sale of certain preferred stock in the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) as ordinary income or loss.
Repeals the Community Reinvestment Act.
Requires the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) to establish a net worth certificate program to provide capital to assist insured banks in resolving solvency problems.
Government-Sponsored Enterprises Free Market Reform Act of 2008- Requires the Director of the Federal Housing Finance Agency (FHFA) to: (1) terminate the conservatorship of Fannie Mae and the Freddie Mac, jointly defined as the enterprise, if the Director determines that the enterprise is financially viable; or (2) immediately appoint FHFA as receiver of the enterprise if it is found not financially viable. Limits the amount of mortgage assets the enterprise may own after the termination of its conservatorship. Requires the Director to establish mandatory minimum capital levels for the enterprise.
Amends the Federal National Mortgage Association Charter Act and the Federal Home Loan Mortgage Corporation Act to repeal provisions governing enterprise authority to purchase and sell certain insured and conventional mortgages and to engage in certain lending activities.
Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to repeal the new housing price index.
Amends the Housing and Economic Recovery Act of 2008 to repeal certain conforming loan limits.
Imposes requirements for the renewal of the enterprise's charter if it becomes financially sound and for winding down its operations and dissolving the enterprise otherwise.
[Congressional Bills 110th Congress]
[From the U.S. Government Printing Office]
[H.R. 7264 Introduced in House (IH)]
110th CONGRESS
2d Session
H. R. 7264
To amend the Internal Revenue Code of 1986 to provide for economic
stabilization, capital utilization, and enterprise reform, and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 3, 2008
Mr. King of Iowa (for himself, Mrs. Bachmann, Mr. Linder, Mr. Gingrey,
Mr. Broun of Georgia, Ms. Foxx, Mr. Rohrabacher, Mr. Poe, Mr. Sali, and
Mr. Gohmert) introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Financial Services, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for economic
stabilization, capital utilization, and enterprise reform, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``Reliable Economic
Stabilization, Capital Utilization, and Enterprise Reform Act of
2008''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title, etc.
TITLE I--INCENTIVES FOR ECONOMIC STABILIZATION AND CAPITAL UTILIZATION
Sec. 101. Reduction in capital gain rate for sales and exchanges for
certain troubled assets.
Sec. 102. 5-year carryback of losses.
Sec. 103. Incentives to reinvest foreign earnings in United States.
Sec. 104. Gain or loss from sale or exchange of certain preferred
stock.
Sec. 105. Repeal of Community Reinvestment Act.
Sec. 106. Net worth certificate program.
TITLE II--GOVERNMENT-SPONSORED ENTERPRISES FREE MARKET REFORM
Sec. 201. Short title.
Sec. 202. Definitions.
Sec. 203. Termination of current conservatorship.
Sec. 204. Limitation of enterprise authority upon emergence from
conservatorship.
Sec. 205. Requirement to periodically renew charter until wind down and
dissolution.
Sec. 206. Required wind down of operations and dissolution of
enterprise.
TITLE I--INCENTIVES FOR ECONOMIC STABILIZATION AND CAPITAL UTILIZATION
SEC. 101. REDUCTION IN CAPITAL GAIN RATE FOR SALES AND EXCHANGES FOR
CERTAIN TROUBLED ASSETS.
(a) In General.--Part I of subchapter P of chapter 1 of the
Internal Revenue Code of 1986 (relating to treatment of capital gains)
is amended by adding at the end the following new section:
``SEC. 1203. GAIN ON TROUBLED ASSETS.
``(a) In General.--Gross income shall not include the applicable
percentage of any gain from the sale or exchange of a troubled asset
held for more than 1 year.
``(b) Applicable Percentage.--For purposes of subsection (a), the
applicable percentage shall be determined in accordance with the
following table:
``In the case of sales and exchanges-- The applicable
After: Before: percentage is:
Date of enactment of this section....... End of 2-year period beginning on 100 percent
such date..........................
End of such 2-year period............... End of 4-year period beginning on 67 percent
such date..........................
End of such 4-year period............... End of 6-year period beginning on 33 percent
such date..........................
End of such 6-year period............... .................................... 0 percent.
``(c) Troubled Assets.--The term `troubled assets' means
residential or commercial mortgages and any securities, obligations, or
other instruments that are based on or related to such mortgages, that
in each case was originated or issued on or before March 14, 2008, the
purchase of which the Secretary determines promotes financial market
stability and which are acquired after the date of enactment of this
section and before January 1, 2010.''.
(b) Conforming Amendment.--The table of sections for part I of
subchapter P of chapter 1 of such Code is amended by adding at the end
the following new item:
``Sec. 1203. Gain on troubled assets.''.
(c) Effective Date.--The amendments made by this section shall
apply to sales and exchanges after the date of the enactment of this
Act.
SEC. 102. 5-YEAR CARRYBACK OF LOSSES.
(a) In General.--Subparagraph (H) of section 172(b)(1) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(H) 5-year carryback of certain losses.--
``(i) Taxable years ending during 2001 and
2002.--In the case of a net operating loss for
any taxable year ending during 2001 or 2002,
subparagraph (A)(i) shall be applied by
substituting `5' for `2' and subparagraph (F)
shall not apply.
``(ii) Taxable years ending during 2007,
2008, and 2009.--In the case of a net operating
loss for any taxable year ending during 2007,
2008, or 2009--
``(I) subparagraph (A)(i) shall be
applied by substituting `5' for `2',
``(II) subparagraph (E)(ii) shall
be applied by substituting `4' for `2',
and
``(III) subparagraph (F) shall not
apply.''.
(b) Temporary Suspension of 90 Percent Limit on Certain NOL
Carrybacks and Carryovers.--
(1) In general.--Subclause (I) of section 56(d)(1)(A)(ii)
of such Code is amended--
(A) by inserting ``and 2007, 2008, or 2009'' after
``2001 or 2002'', and
(B) by inserting ``and 2007, 2008, and 2009'' after
``2001 and 2002''.
(2) Conforming amendment.--Subclause (I) of section
56(d)(1)(A)(i) of such Code is amended by inserting ``amount of
such'' before ``deduction described in clause (ii)(I)''.
(c) Anti-Abuse Rules.--The Secretary of the Treasury or the
Secretary's designee shall prescribe such rules as are necessary to
prevent the abuse of the purposes of the amendments made by this
section, including antistuffing rules, antichurning rules (including
rules relating to sale-leasebacks), and rules similar to the rules
under section 1091 of the Internal Revenue Code of 1986 relating to
losses from wash sales.
(d) Effective Dates.--
(1) Subsection (a).--
(A) In general.--Except as provided in subparagraph
(B), the amendments made by subsection (a) shall apply
to net operating losses arising in taxable years ending
in 2007, 2008, or 2009.
(B) Election.--In the case of any taxpayer with a
net operating loss for a taxable year ending during
2007 or 2008--
(i) any election made under section
172(b)(3) of the Internal Revenue Code of 1986
may not withstanding such section) be revoked
before October 15, 2009, and
(ii) any election made under section 172(j)
of such Code shall (notwithstanding such
section) be treated as timely made if made
before October 15, 2009.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to taxable years ending after December 31, 2006.
SEC. 103. INCENTIVES TO REINVEST FOREIGN EARNINGS IN UNITED STATES.
(a) In General.--Section 965 of the Internal Revenue Code of 1986
is amended to read as follows:
``SEC. 965. DEDUCTION FOR DIVIDENDS RECEIVED.
``(a) Deduction.--
``(1) In general.--In the case of a corporation which is a
United States shareholder and for which the election under this
section is in effect for the taxable year, there shall be
allowed as a deduction an amount equal to the applicable
percentage of cash dividends which are received during such
taxable year by such shareholder from controlled foreign
corporations.
``(2) Applicable percentage.--For purposes of paragraph
(1)--
``(A) In general.--Except as provided by
subparagraph (B), the term `applicable percentage'
means 85 percent.
``(B) Distressed debt.--In the case of dividends
received with respect to which the requirements of
subsection (b)(4)(B) are met, such term means 100
percent.
``(3) Dividends paid indirectly from controlled foreign
corporations.--If, within the taxable year for which the
election under this section is in effect, a United States
shareholder receives a cash distribution from a controlled
foreign corporation which is excluded from gross income under
section 959(a), such distribution shall be treated for purposes
of this section as a cash dividend to the extent of any amount
included in income by such United States shareholder under
section 951(a)(1)(A) as a result of any cash dividend during
such taxable year to--
``(A) such controlled foreign corporation from
another controlled foreign corporation that is in a
chain of ownership described in section 958(a), or
``(B) any other controlled foreign corporation in
such chain of ownership, but only to the extent of cash
distributions described in section 959(b) which are
made during such taxable year to the controlled foreign
corporation from which such United States shareholder
received such distribution.
``(b) Limitations.--
``(1) In general.--The amount of dividends taken into
account under subsection (a) shall not exceed the greater of--
``(A) $500,000,000,
``(B) the amount shown on the applicable financial
statement as earnings permanently reinvested outside
the United States, or
``(C) in the case of an applicable financial
statement which fails to show a specific amount of
earnings permanently reinvested outside the United
States and which shows a specific amount of tax
liability attributable to such earnings, the amount
equal to the amount of such liability divided by 0.35.
The amounts described in subparagraphs (B) and (C) shall be
treated as being zero if there is no such statement or such
statement fails to show a specific amount of such earnings or
liability, as the case may be.
``(2) Dividends must be extraordinary.--The amount of
dividends taken into account under subsection (a) shall not
exceed the excess (if any) of--
``(A) the cash dividends received during the
taxable year by such shareholder from controlled
foreign corporations, over
``(B) the sum of--
``(i) the dividends received during the
base period year by such shareholder from
controlled foreign corporations,
``(ii) the amounts includible in such
shareholder's gross income for the base period
year under section 951(a)(1)(B) with respect to
controlled foreign corporations, and
``(iii) the amounts that would have been
included for the base period year but for
section 959(a) with respect to controlled
foreign corporations.
The amount taken into account under clause (iii) for
the base period year shall not include any amount which
is not includible in gross income by reason of an
amount described in clause (ii) with respect to a prior
taxable year. Amounts described in subparagraph (B) for
the base period year shall be such amounts as shown on
the most recent return filed for such year; except that
amended returns filed after June 30, 2007, shall not be
taken into account.
``(3) Reduction of benefit if increase in related party
indebtedness.--The amount of dividends which would (but for
this paragraph) be taken into account under subsection (a)
shall be reduced by the excess (if any) of--
``(A) the amount of indebtedness of the controlled
foreign corporation to any related person (as defined
in section 954(d)(3)) as of the close of the taxable
year for which the election under this section is in
effect, over
``(B) the amount of indebtedness of the controlled
foreign corporation to any related person (as so
defined) as of the close of September 26, 2008.
All controlled foreign corporations with respect to which the
taxpayer is a United States shareholder shall be treated as 1
controlled foreign corporation for purposes of this paragraph.
The Secretary may prescribe such regulations as may be
necessary or appropriate to prevent the avoidance of the
purposes of this paragraph, including regulations which provide
that cash dividends shall not be taken into account under
subsection (a) to the extent such dividends are attributable to
the direct or indirect transfer (including through the use of
intervening entities or capital contributions) of cash or other
property from a related person (as so defined) to a controlled
foreign corporation.
``(4) Requirements.--
``(A) Requirement to invest in united states.--
Except as provided by subparagraph (B), subsection (a)
shall not apply to any dividend received by a United
States shareholder unless the amount of the dividend is
invested in the United States pursuant to a domestic
reinvestment plan which--
``(i) is approved by the taxpayer's
president, chief executive officer, or
comparable official before the payment of such
dividend and subsequently approved by the
taxpayer's board of directors, management
committee, executive committee, or similar
body, and
``(ii) provides for the reinvestment of
such dividend in the United States (other than
as payment for executive compensation),
including as a source for the funding of worker
hiring and training, infrastructure, research
and development, capital investments, or the
financial stabilization of the corporation for
the purposes of job retention or creation.
``(B) Distressed debt.--The requirements of this
subparagraph are met if amounts repatriated are
invested in distressed debt (as defined by the
Secretary) for at least one year.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable financial statement.--The term `applicable
financial statement' means--
``(A) with respect to a United States shareholder
which is required to file a financial statement with
the Securities and Exchange Commission (or which is
included in such a statement so filed by another
person), the most recent audited annual financial
statement (including the notes which form an integral
part of such statement) of such shareholder (or which
includes such shareholder)--
``(i) which was so filed on or before June
30, 2007, and
``(ii) which was certified on or before
June 30, 2007, as being prepared in accordance
with generally accepted accounting principles,
and
``(B) with respect to any other United States
shareholder, the most recent audited financial
statement (including the notes which form an integral
part of such statement) of such shareholder (or which
includes such shareholder)--
``(i) which was certified on or before June
30, 2007, as being prepared in accordance with
generally accepted accounting principles, and
``(ii) which is used for the purposes of a
statement or report--
``(I) to creditors,
``(II) to shareholders, or
``(III) for any other substantial
nontax purpose.
``(2) Base period year.--
``(A) In general.--The base period year is the
first taxable year ending in 2007.
``(B) Mergers, acquisitions, etc..--
``(i) In general.--Rules similar to the
rules of subparagraphs (A) and (B) of section
41(f)(3) shall apply for purposes of this
paragraph.
``(ii) Spin-offs, etc.--If there is a
distribution to which section 355 (or so much
of section 356 as relates to section 355)
applies during the base period year and the
controlled corporation (within the meaning of
section 355) is a United States shareholder--
``(I) the controlled corporation
shall be treated as being in existence
during the period that the distributing
corporation (within the meaning of
section 355) is in existence, and
``(II) for purposes of applying
subsection (b)(2) to the controlled
corporation and the distributing
corporation, amounts described in
subsection (b)(2)(B) which are received
or includible by the distributing
corporation or controlled corporation
(as the case may be) before the
distribution referred to in subclause
(I) from a controlled foreign
corporation shall be allocated between
such corporations in proportion to
their respective interests as United
States shareholders of such controlled
foreign corporation immediately after
such distribution.
Subclause (II) shall not apply if neither the
controlled corporation nor the distributing
corporation is a United States shareholder of
such controlled foreign corporation immediately
after such distribution.
``(3) Dividend.--The term `dividend' shall not include
amounts includible in gross income as a dividend under section
78, 367, or 1248. In the case of a liquidation under section
332 to which section 367(b) applies, the preceding sentence
shall not apply to the extent the United States shareholder
actually receives cash as part of the liquidation.
``(4) Coordination with dividends received deduction.--No
deduction shall be allowed under section 243 or 245 for any
dividend for which a deduction is allowed under this section.
``(5) Controlled groups.--
``(A) In general.--All United States shareholders
which are members of an affiliated group filing a
consolidated return under section 1501 shall be treated
as one United States shareholder.
``(B) Application of $500,000,000 limit.--All
corporations which are treated as a single employer
under section 52(a) shall be limited to one
$500,000,000 amount in subsection (b)(1)(A), and such
amount shall be divided among such corporations under
regulations prescribed by the Secretary.
``(C) Permanently reinvested earnings.--If a
financial statement is an applicable financial
statement for more than 1 United States shareholder,
the amount applicable under subparagraph (B) or (C) of
subsection (b)(1) shall be divided among such
shareholders under regulations prescribed by the
Secretary.
``(d) Denial of Foreign Tax Credit; Denial of Certain Expenses.--
``(1) Foreign tax credit.--No credit shall be allowed under
section 901 for any taxes paid or accrued (or treated as paid
or accrued) with respect to the deductible portion of--
``(A) any dividend, or
``(B) any amount described in subsection (a)(2)
which is included in income under section 951(a)(1)(A).
No deduction shall be allowed under this chapter for any tax
for which credit is not allowable by reason of the preceding
sentence.
``(2) Expenses.--No deduction shall be allowed for expenses
properly allocated and apportioned to the deductible portion
described in paragraph (1).
``(3) Deductible portion.--For purposes of paragraph (1),
unless the taxpayer otherwise specifies, the deductible portion
of any dividend or other amount is the amount which bears the
same ratio to the amount of such dividend or other amount as
the amount allowed as a deduction under subsection (a) for the
taxable year bears to the amount described in subsection
(b)(2)(A) for such year.
``(4) Coordination with section 78.--Section 78 shall not
apply to any tax which is not allowable as a credit under
section 901 by reason of this subsection.
``(e) Increase in Tax on Included Amounts Not Reduced by Credits,
etc.--
``(1) In general.--Any tax under this chapter by reason of
nondeductible CFC dividends shall not be treated as tax imposed
by this chapter for purposes of determining--
``(A) the amount of any credit allowable under this
chapter, or
``(B) the amount of the tax imposed by section 55.
Subparagraph (A) shall not apply to the credit under section 53
or to the credit under section 27(a) with respect to taxes
which are imposed by foreign countries and possessions of the
United States and are attributable to such dividends.
``(2) Limitation on reduction in taxable income, etc.--
``(A) In general.--The taxable income of any United
States shareholder for any taxable year shall in no
event be less than the amount of nondeductible CFC
dividends received during such year.
``(B) Coordination with section 172.--The
nondeductible CFC dividends for any taxable year shall
not be taken into account--
``(i) in determining under section 172 the
amount of any net operating loss for such
taxable year, and
``(ii) in determining taxable income for
such taxable year for purposes of the 2nd
sentence of section 172(b)(2).
``(3) Nondeductible cfc dividends.--For purposes of this
subsection, the term `nondeductible CFC dividends' means the
excess of the amount of dividends taken into account under
subsection (a) over the deduction allowed under subsection (a)
for such dividends.
``(f) Election.--The taxpayer may elect to apply this section to--
``(1) the taxpayer's last taxable year which begins before
the date of the enactment of this section, or
``(2) the taxpayer's first taxable year which begins during
the 1-year period beginning on such date.
Such election may be made for a taxable year only if made before the
due date (including extensions) for filing the return of tax for such
taxable year.''.
(b) Clerical Amendment.--The item in the table of sections for
subpart F of part III of subchapter N of chapter 1 of such Code
relating to section 965 is amended to read as follows:
``Sec. 965. Deduction for dividends received.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending on or after the date of the enactment of
this Act.
SEC. 104. GAIN OR LOSS FROM SALE OR EXCHANGE OF CERTAIN PREFERRED
STOCK.
(a) In General.--For purposes of the Internal Revenue Code of 1986,
gain or loss from the sale or exchange of any applicable preferred
stock by any applicable financial institution shall be treated as
ordinary income or loss.
(b) Applicable Preferred Stock.--For purposes of this section, the
term ``applicable preferred stock'' means any stock--
(1) which is preferred stock in--
(A) the Federal National Mortgage Association,
established pursuant to the Federal National Mortgage
Association Charter Act (12 U.S.C. 1716 et seq.), or
(B) the Federal Home Loan Mortgage Corporation,
established pursuant to the Federal Home Loan Mortgage
Corporation Act (12 U.S.C. 1451 et seq.), and
(2) which--
(A) was held by the applicable financial
institution on September 6, 2008, or
(B) was sold or exchanged by the applicable
financial institution on or after January 1, 2008, and
before September 7, 2008.
(c) Applicable Financial Institution.--For purposes of this
section:
(1) In general.--Except as provided in paragraph (2), the
term ``applicable financial institution'' means--
(A) a financial institution referred to in section
582(c)(2) of the Internal Revenue Code of 1986, or
(B) a depository institution holding company (as
defined in section 3(w)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(w)(1))).
(2) Special rules for certain sales.--In the case of--
(A) a sale or exchange described in subsection
(b)(2)(B), an entity shall be treated as an applicable
financial institution only if it was an entity
described in subparagraph (A) or (B) of paragraph (1)
at the time of the sale or exchange, and
(B) a sale or exchange after September 6, 2008, of
preferred stock described in subsection (b)(2)(A), an
entity shall be treated as an applicable financial
institution only if it was an entity described in
subparagraph (A) or (B) of paragraph (1) at all times
during the period beginning on September 6, 2008, and
ending on the date of the sale or exchange of the
preferred stock.
(d) Special Rule for Certain Property Not Held on September 6,
2008.--The Secretary of the Treasury or the Secretary's delegate may
extend the application of this section to all or a portion of the gain
or loss from a sale or exchange in any case where--
(1) an applicable financial institution sells or exchanges
applicable preferred stock after September 6, 2008, which the
applicable financial institution did not hold on such date, but
the basis of which in the hands of the applicable financial
institution at the time of the sale or exchange is the same as
the basis in the hands of the person which held such stock on
such date, or
(2) the applicable financial institution is a partner in a
partnership which--
(A) held such stock on September 6, 2008, and later
sold or exchanged such stock, or
(B) sold or exchanged such stock during the period
described in subsection (b)(2)(B).
(e) Regulatory Authority.--The Secretary of the Treasury or the
Secretary's delegate may prescribe such guidance, rules, or regulations
as are necessary to carry out the purposes of this section.
(f) Effective Date.--This section shall apply to sales or exchanges
occurring after December 31, 2007, in taxable years ending after such
date.
SEC. 105. REPEAL OF COMMUNITY REINVESTMENT ACT.
The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is
hereby repealed.
SEC. 106. NET WORTH CERTIFICATE PROGRAM.
(a) Establishment; Purposes.--
(1) Establishment.--As soon as possible after the date of
the enactment of this Act, the Board of Directors of the
Federal Deposit Insurance Corporation (in this section referred
to as the ``Corporation'') shall establish a net worth
certificate program under this section to provide capital to
insured depository institutions (as such term is defined in
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)
to assist such institutions to resolve solvency problems.
(2) Purposes.--The purposes of the net worth certificate
program established under this section shall be--
(A) to improve the capital position of troubled
insured depository institutions with real estate
holdings;
(B) to provide such insured depository institutions
the ability to sell and restructure assets; and
(C) to assist such institutions in their recovery
without use of taxpayer funds.
(b) Principles.--The net worth program established under this
section shall--
(1) be based upon the Federal Savings and Loan Insurance
Corporation net worth program established under title II of the
Garn-St Germain Depository Institutions Act of 1982 (Public Law
97-320; 96 Stat. 1489);
(2) be made available only for troubled financial
depository institutions that the Corporation determines could
be financially viable if provided solvency assistance under the
program;
(3) provide for the Corporation to purchase capital in
troubled insured depository institutions in the form of
subordinated debentures or net worth certificates in such
institutions;
(4) provide that insured depository institutions
participating in the program shall agree to such regulations
and terms of the program as the Corporation shall provide,
which shall include strict oversight and supervision, including
limitations on the compensation of senior executive officers of
such institutions and terms for removal of officers for poor
management;
(5) provide that the Corporation shall fund net worth
certificates under the program by issuance of Corporation
senior notes and obligations to participating insured
depository institutions;
(6) provide that the interest rate on net worth
certificates issued under the program and the senior notes and
obligations issued under the program by the Corporation shall
be identical;
(7) not involve any subsidy, appropriation of funds, or
other cash outlay or use of taxpayer funds; and
(8) provide that asset sale transactions under the program
be held in the private market.
(c) Regulations.--The Board of Directors of the Corporation shall
issue any regulations necessary to carry out the net worth certificate
program under this section.
TITLE II--GOVERNMENT-SPONSORED ENTERPRISES FREE MARKET REFORM
SEC. 201. SHORT TITLE.
This title may be cited as the ``Government-Sponsored Enterprises
Free Market Reform Act of 2008''.
SEC. 202. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Charter.--The term ``charter'' means--
(A) with respect to the Federal National Mortgage
Association, the Federal National Mortgage Association
Charter Act (12 U.S.C. 1716 et seq.); and
(B) with respect to the Federal Home Loan Mortgage
Corporation, the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1451 et seq.).
(2) Director.--The term ``Director'' means the Director of
the Federal Housing Finance Agency
(3) Enterprise.--The term ``enterprise'' means--
(A) the Federal National Mortgage Association; and
(B) the Federal Home Loan Mortgage Corporation.
(4) Guarantee.--The term ``guarantee'' means, with respect
to an enterprise, the credit support of the enterprise that is
provided by the Federal Government through its charter as a
government-sponsored enterprise.
SEC. 203. TERMINATION OF CURRENT CONSERVATORSHIP.
(a) In General.--Upon the expiration of the period referred to in
subsection (b), the Director of the Federal Housing Finance Agency
shall determine, with respect to each enterprise, if the enterprise is
financially viable at that time and--
(1) if the Director determines that the enterprise is
financially viable, immediately take all actions necessary to
terminate the conservatorship for each of the enterprises; or
(2) if the Director determines that the enterprise is not
financially viable, immediately appoint the Federal Housing
Finance Agency as receiver under section 1367 of the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992
and carry out such receivership under the authority of such
section.
(b) Timing.--The period referred to in this subsection is, with
respect to an enterprise--
(1) except as provided in paragraph (2), the 24-month
beginning upon the date of the enactment of this Act; or
(2) if the Director determines before the expiration of the
period referred to in paragraph (1) that the financial markets
would be adversely affected without the extension of such
period under this paragraph with respect to that enterprise,
the 30-month period beginning upon the date of the enactment of
this Act.
(c) Financial Viability.--The Director may not determine that an
enterprise is financially viable for purposes of subsection (a) if the
Director determines that any of the conditions for receivership set
forth in paragraph (3) or (4) of section 1367(a) of the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C.
4617(a)) exists at the time with respect to the enterprise.
SEC. 204. LIMITATION OF ENTERPRISE AUTHORITY UPON EMERGENCE FROM
CONSERVATORSHIP.
(a) Revised Authority.--Upon the expiration of the period referred
to in section 203(b), if the Director makes the determination under
section 203(a)(1), the following provisions shall take effect:
(1) Portfolio limitations.--Subtitle B of title XIII of the
Housing and Community Development Act of 1992 (12 U.S.C. 4611
et seq.) is amended by adding at the end the following new
section:
``SEC. 1369E. RESTRICTION ON MORTGAGE ASSETS OF ENTERPRISES.
``(a) Restriction.--No enterprise shall own, as of any applicable
date in this subsection or thereafter, mortgage assets in excess of--
``(1) upon the expiration of the period referred to in
section 203(b) of the Government-Sponsored Enterprises Free
Market Reform Act of 2008, $850,000,000,000; or
``(2) on December 31 of each year thereafter, 80.0 percent
of the aggregate amount of mortgage assets of the enterprise as
of December 31 of the immediately preceding calendar year;
except that in no event shall an enterprise be required under this
section to own less than $250,000,000,000 in mortgage assets.
``(b) Definition of Mortgage Assets.--For purposes of this section,
the term `mortgage assets' means, with respect to an enterprise, assets
of such enterprise consisting of mortgages, mortgage loans, mortgage-
related securities, participation certificates, mortgage-backed
commercial paper, obligations of real estate mortgage investment
conduits and similar assets, in each case to the extent such assets
would appear on the balance sheet of such enterprise in accordance with
generally accepted accounting principles in effect in the United States
as of September 7, 2008 (as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board from time to
time; and without giving any effect to any change that may be made
after September 7, 2008, in respect of Statement of Financial
Accounting Standards No. 140 or any similar accounting standard).''.
(2) Increase in minimum capital requirement.--Section 1362
of the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4612), as amended by section
1111 of the Housing and Economic Recovery Act of 2008 (Public
Law 110-289), is amended--
(A) in subsection (a), by striking ``For purposes
of this subtitle, the minimum capital level for each
enterprise shall be'' and inserting ``The minimum
capital level established under subsection (g) for each
enterprise may not be lower than'';
(B) in subsection (c)--
(i) by striking ``subsections (a) and'' and
inserting ``subsection'';
(ii) by striking ``regulated entities'' the
first place such term appears and inserting
``Federal Home Loan Banks'';
(iii) by striking ``for the enterprises,'';
(iv) by striking ``, or for both the
enterprises and the banks,'';
(v) by striking ``the level specified in
subsection (a) for the enterprises or''; and
(vi) by striking ``the regulated entities
operate'' and inserting ``such banks operate'';
(C) in subsection (d)(1)--
(i) by striking ``subsections (a) and'' and
inserting ``subsection''; and
(ii) by striking ``regulated entity'' each
place such term appears and inserting ``Federal
home loan bank'';
(D) in subsection (e), by striking ``regulated
entity'' each place such term appears and inserting
``Federal home loan bank'';
(E) in subsection (f)--
(i) by striking ``the amount of core
capital maintained by the enterprises,''; and
(ii) by striking ``regulated entities'' and
inserting ``banks''; and
(F) by adding at the end the following new
subsection:
``(g) Establishment of Revised Minimum Capital Levels.--
``(1) In general.--The Director shall cause the enterprises
to achieve and maintain adequate capital by establishing
minimum levels of capital for the enterprises,which may include
any prudential standards necessary to ensure long-term
institutional viability and competitive equity in the market,
and by using such other methods as the Director deems
appropriate.
``(2) Authority.--The Director shall have the authority to
establish such minimum level of capital for an enterprise in
excess of the level specified under subsection (a) as the
Director, in the Director's discretion, deems to be necessary
or appropriate in light of the particular circumstances of the
enterprise.
``(h) Failure To Maintain Revised Minimum Capital Levels.--
``(1) Unsafe and unsound practice or condition.--Failure of
a enterprise to maintain capital at or above its minimum level
as established pursuant to subsection (c) of this section may
be deemed by the Director, in his discretion, to constitute an
unsafe and unsound practice or condition within the meaning of
this title.
``(2) Directive to achieve capital level.--
``(A) Authority.--In addition to, or in lieu of,
any other action authorized by law, including paragraph
(1), the Director may issue a directive to an
enterprise that fails to maintain capital at or above
its required level as established pursuant to
subsection (c) of this section.
``(B) Plan.--Such directive may require the
enterprise to submit and adhere to a plan acceptable to
the Director describing the means and timing by which
the enterprise shall achieve its required capital
level.
``(C) Enforcement.--Any such directive issued
pursuant to this paragraph, including plans submitted
pursuant thereto, shall be enforceable under the
provisions of subtitle C of this title to the same
extent as an effective and outstanding order issued
pursuant to subtitle C of this title which has become
final.
``(3) Adherence to plan.--
``(A) Consideration.--The Director may consider
such enterprise's progress in adhering to any plan
required under this subsection whenever such enterprise
seeks the requisite approval of the Director for any
proposal which would divert earnings, diminish capital,
or otherwise impede such enterprise's progress in
achieving its minimum capital level.
``(B) Denial.--The Director may deny such approval
where it determines that such proposal would adversely
affect the ability of the enterprise to comply with
such plan.''.
(3) Repeal of increases to conforming loan limits.--
(A) Repeal of temporary increase in economic
stimulus act.--Section 201 of the Economic Stimulus Act
of 2008 (Public Law 110-185) is hereby repealed.
(B) Repeal of general limit and permanent high-cost
area increase.--Paragraph (2) of section 302(b) of the
Federal National Mortgage Association Charter Act (12
U.S.C. 1717(b)(2)) and paragraph (2) of section 305(a)
of the Federal Home Loan Mortgage Corporation Act (12
U.S.C. 1454(a)(2)) are each amended to read as such
sections were in effect immediately before the
enactment of the Housing and Economic Recovery Act of
2008 (Public Law 110-289).
(C) Repeal of new housing price index.--Section
1322 of the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992, as added by section
1124(d) of the Housing and Economic Recovery Act of
2008 (Public Law 110-289), is hereby repealed.
(D) Repeal.--Section 1124 of the Housing and
Economic Recovery Act of 2008 (Public Law 110-289) is
hereby repealed.
(E) Establishment of conforming loan limit.--For
the year in which the expiration of the period referred
to in section 203(b) of this section occurs, the
limitations governing the maximum original principal
obligation of conventional mortgages that may be
purchased by the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation,
referred to in section 302(b)(2) of the Federal
National Mortgage Association Charter Act (12 U.S.C.
1717(b)(2)) and section 305(a)(2) of the Federal Home
Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)),
respectively, shall be considered to be--
(i) $417,000 for a mortgage secured by a
single-family residence,
(ii) $533,850 for a mortgage secured by a
2-family residence,
(iii) $645,300 for a mortgage secured by a
3-family residence, and
(iv) $801,950 for a mortgage secured by a
4-family residence,
and such limits shall be adjusted effective each
January 1 thereafter in accordance with such sections
302(b)(2) and 305(a)(2).
(F) Prohibition of purchase of mortgages exceeding
median area home price.--
(i) Fannie mae.--Section 302(b)(2) of the
Federal National Mortgage Association Charter
Act (12 U.S.C. 1717(b)(2)) is amended by adding
at the end the following new sentence:
``Notwithstanding any other provision of this
title, the corporation may not purchase any
mortgage for a property having a principal
obligation that exceeds the median home price,
for properties of the same size, for the area
in which such property subject to the mortgage
is located.''.
(ii) Freddie mac.--Section 305(a)(2) of the
Federal Home Loan Mortgage Corporation Act (12
U.S.C. 1454(a)(2)) is amended by adding at the
end the following new sentence:
``Notwithstanding any other provision of this
title, the Corporation may not purchase any
mortgage for a property having a principal
obligation that exceeds the median home price,
for properties of the same size, for the area
in which such property subject to the mortgage
is located.''.
(4) Requirement to pay state and local taxes.--
(A) Fannie mae.--Paragraph (2) of section 309(c) of
the Federal National Mortgage Association Charter Act
(12 U.S.C. 1723a(c)(2)) is amended--
(i) by striking ``shall be exempt from''
and inserting ``shall be subject to''; and
(ii) by striking ``except that any'' and
inserting ``and any''.
(B) Freddie mac.--Section 303(e) of the Federal
Home Loan Mortgage Corporation Act (12 U.S.C. 1452(e))
is amended--
(i) by striking ``shall be exempt from''
and inserting ``shall be subject to''; and
(ii) by striking ``except that any'' and
inserting ``and any''.
(5) Repeals relating to registration of securities.--
(A) Fannie mae.--
(i) Mortgage-backed securities.--Section
304(d) of the Federal National Mortgage
Association Charter Act (12 U.S.C. 1719(d)) is
amended by striking the fourth sentence.
(ii) Subordinate obligations.--Section
304(e) of the Federal National Mortgage
Association Charter Act (12 U.S.C. 1719(e)) is
amended by striking the fourth sentence.
(B) Freddie mac.--Section 306 of the Federal Home
Loan Mortgage Corporation Act (12 U.S.C. 1455) is
amended by striking subsection (g).
(6) Recoupment of costs for federal guarantee.--
(A) Assessments.--The Director of the Federal
Housing Finance Agency shall establish and collect from
each enterprise assessments in the amount determined
under subparagraph (B). In determining the method and
timing for making such assessments, the Director shall
take into consideration the determinations and
conclusions of the study under subsection (b) of this
section.
(B) Determination of costs of guarantee.--
Assessments under subparagraph (A) with respect to an
enterprise shall be in such amount as the Director
determines necessary to recoup to the Federal
Government the full value of the benefit the enterprise
receives from the guarantee provided by the Federal
Government for the obligations and financial viability
of the enterprise, based upon the dollar value of such
benefit in the market to such enterprise when not
operating under conservatorship or receivership. To
determine such amount, the Director shall establish a
risk-based pricing mechanism as the Director considers
appropriate, taking into consideration the
determinations and conclusions of the study under
subsection (b) of this section.
(C) Treatment of recouped amounts.--The Director
shall cover into the general fund of the Treasury any
amounts received from assessments made under this
paragraph.
(b) GAO Study Regarding Recoupment of Costs for Federal Government
Guarantee.--The Comptroller General of the United States shall conduct
a study to determine a risk-based pricing mechanism to accurately
determine the value of the benefit the enterprises receive from the
guarantee provided by the Federal Government for the obligations and
financial viability of the enterprises. Such study shall establish a
dollar value of such benefit in the market to each enterprise when not
operating under conservatorship or receivership, shall analyze various
methods of the Federal Government assessing a charge for such value
received (including methods involving an annual fee or a fee for each
mortgage purchased or securitized), and shall make a recommendation of
the best such method for assessing such charge. Not later than 12
months after the date of the enactment of this Act, the Comptroller
General shall submit to the Congress a report setting forth the
determinations and conclusions of such study.
SEC. 205. REQUIREMENT TO PERIODICALLY RENEW CHARTER UNTIL WIND DOWN AND
DISSOLUTION.
(a) Required Renewal; Wind Down and Dissolution Upon Non-Renewal.--
Upon the expiration of the 3-year period that begins upon the
expiration of the period referred to in section 203(b), unless the
charter of an enterprise is renewed pursuant to subsection (b) of this
section, section 206 (relating to wind down of operations and
dissolution of enterprise) shall apply to the enterprise.
(b) Renewal Procedure.--
(1) Application; timing.--The Director shall provide for
each enterprise to apply to the Director, before the expiration
of the 3-year period under subsection (a), for renewal of the
charter of the enterprise.
(2) Standard.--The Director shall approve the application
of an enterprise for the renewal of the charter of the
enterprise if--
(A) the application includes a certification by the
enterprise that the enterprise is financially sound and
is complying with all provisions of, and amendments
made by, section 204 of this title applicable to such
enterprise; and
(B) the Director verifies that the certification
made pursuant to subparagraph (A) is accurate.
(c) Option To Reapply.--Nothing in this section may be construed to
require an enterprise to apply under this section for renewal of the
charter of the enterprise.
SEC. 206. REQUIRED WIND DOWN OF OPERATIONS AND DISSOLUTION OF
ENTERPRISE.
(a) Applicability.--This section shall apply to an enterprise--
(1) upon the expiration of the 3-year period referred to in
such section 205(a), to the extent provided in such section;
and
(2) if this section has not previously applied to the
enterprise, upon the expiration of the 6-year period that
begins upon the expiration of the period referred to in section
203(b).
(b) Wind Down.--Upon the applicability of this section to an
enterprise, the Director and the Secretary of the Treasury shall
jointly take such action, and may prescribe such regulations and
procedures, as may be necessary to wind down the operations of an
enterprise as an entity chartered by the United States Government over
the duration of the 10-year period beginning upon the applicability of
this section to the enterprise (pursuant to subsection (a)) in an
orderly manner consistent with this Act and the ongoing obligations of
the enterprise.
(c) Division of Assets and Liabilities; Authority To Establish
Holding Corporation and Dissolution Trust Fund.--The action and
procedures required under subsection (b)--
(1) shall include the establishment and execution of plans
to provide for an equitable division and distribution of assets
and liabilities of the enterprise, including any liability of
the enterprise to the United States Government or a Federal
reserve bank that may continue after the end of the period
described in subsection (b); and
(2) may provide for establishment of--
(A) a holding corporation organized under the laws
of any State of the United States or the District of
Columbia for the purposes of the reorganization and
restructuring of the enterprise; and
(B) one or more trusts to which to transfer--
(i) remaining debt obligations of the
enterprise, for the benefit of holders of such
remaining obligations; or
(ii) remaining mortgages held for the
purpose of backing mortgage-backed securities,
for the benefit of holders of such remaining
securities.
(d) Repeal of Charter.--Effective upon the expiration of the 10-
year period referred to in subsection (b) for an enterprise, the
charter for the enterprise is repealed, except that the provisions of
such charter in effect immediately before such repeal shall continue to
apply with respect to the rights and obligations of any holders of
outstanding debt obligations and mortgage-backed securities of the
enterprise.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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