12 U.S.C. § 1441b — Resolution Funding Corporation established

(a) Purpose. The Resolution Funding Corporation provides funds to the Resolution Trust Corporation so the Resolution Trust Corporation can carry out this chapter.

(b) Establishment. A corporation called the Resolution Funding Corporation is established.

(c) Management of Funding Corporation.
(1) Directorate. The Funding Corporation is managed by a three-member^* Directorate: (A) the director^* of the Office of Finance of the Federal Home Loan Banks, or the head of a successor office; and (B) two members chosen by the Thrift Depositor Protection Oversight Board from among the presidents of the Federal Home Loan Banks.
(2) Terms. Of the two members appointed under paragraph (1)(B), one serves an initial two-year term and one serves an initial three-year term. After that, members serve three-year terms.
(3) Vacancy. If a member leaves the office the member held when appointed, the member’s Directorate service ends on that date, and the successor to that office serves the rest of the term.
(4) Equal representation. A Federal Home Loan Bank^* president may not receive another Directorate term until the presidents of every other Federal Home Loan Bank^* have served as many terms as that president.
(5) Chairperson. The Thrift Depositor Protection Oversight Board chooses the chairperson from the three Directorate members.
(6) Staff. (A) The Funding Corporation has no paid employees. (B) With the Director’s approval, the Directorate may authorize Federal Home Loan Bank officers, employees, or agents to act for the Funding Corporation as needed for its functions.
(7) Administrative expenses. (A) The Federal Home Loan Banks pay all Funding Corporation administrative expenses, including custodian fees. (B) The Oversight Board determines each Bank’s share by multiplying total expenses for the period by a fraction. The numerator is the amount the Board required that Bank to invest under subsection (e)(4) and (5), calculated without subsection (e)(3) or (6). The denominator is the amount the Board required all Banks to invest under those paragraphs.
(8) Regulation. The Directorate is subject to the Oversight Board’s regulations, orders, and directions.
(9) No compensation. Directorate members receive no pay, allowance, or benefit from the Funding Corporation for serving on it.

(d) Powers. Subject to this section and the Oversight Board’s regulations, orders, and directions, the Funding Corporation has only these powers: (1) issue nonvoting capital stock to the Federal Home Loan Banks; (2) buy Resolution Trust Corporation capital certificates under section 1441a and transfer amounts to that Corporation under subsection (e)(8); (3) issue debentures, bonds, and other obligations, borrow, secure borrowings, and pay interest and redemption premiums; (4) impose subsection (e)(7) assessments; (5) adopt, change, and use a corporate seal; (6) continue until dissolved; (7) make contracts; (8) sue and be sued in its corporate capacity in a competent State^* or Federal court; and (9) exercise incidental powers consistent with this section and section 1441a that are needed to carry out this section.

(e) Capitalization.
(1) The Oversight Board must ensure that the total amounts obtained under this subsection are enough for the Funding Corporation to make the transfers required by paragraph (8) and for the face amounts (principal payable at maturity) of noninterest-bearing instruments in the Principal Fund to equal the total principal of Funding Corporation obligations. Each Federal Home Loan Bank must buy stock at the times and in the amounts the Board prescribes.
(2) Each share has a par value set by the Board. A share may be transferred only among Federal Home Loan Banks, for at least par value, and as the Board prescribes.
(3) A Bank’s total investment may never exceed the following limit. (A) Start with its December 31, 1988 reserves required by the first two sentences of section 1436, plus its undivided profits, and subtract amounts invested in Financing Corporation stock under section 1441. (B) Add, through the date the Principal Fund is fully funded, amounts added after December 31, 1988 to those reserves and the Bank’s quarterly additions to undivided profits, then subtract later Financing Corporation stock investments. (C) Adjust the amount in (B) each year: if all Banks’ reserve and profit additions under (B)(i) total less than $300 million per year, increase each limit by the Board’s allocation of the shortage using paragraph (5)’s percentage; if they total more than $300 million, decrease each limit by the Board’s allocation of the excess using that percentage.
(4) For the first $1 billion that the Director or Board requires all Banks collectively to invest in Financing Corporation or Funding Corporation stock, each Bank’s share is the total investment multiplied by this percentage: Boston 1.8629; New York 9.1006; Pittsburgh 4.2702; Atlanta 14.4007; Cincinnati 8.2653; Indianapolis 5.2863; Chicago 9.6886; Des Moines 6.9301; Dallas 8.8181; Topeka 5.2706; San Francisco 19.9644; Seattle 6.1422. The same rule applies to a successor Bank.
(5) For Funding Corporation investments above $1 billion, each Bank’s share equals the excess multiplied by a fraction. The numerator is the total assets, as of the most recent December 31, of all Savings Association^* Insurance Fund members that are members of that Bank. The denominator is the comparable total for members of all Federal Home Loan Banks. The calculation uses the assets on the funding date.
(6) If a Bank’s paragraph (5) allocation exceeds its paragraph (3) maximum, it is a “deficient Bank” and the excess is handled as follows. (A) Each Bank that is not over its maximum, a “remaining Bank,” must buy stock for the deficient Bank, in addition to its own paragraph (5) amount, up to its maximum. The deficient Bank must later reimburse the remaining Banks from its net earnings or reimbursements, under (C) and (D), and (D)’s use-of-earnings rule applies until full reimbursement. (B) Each remaining Bank’s share of the excess equals the excess multiplied by a fraction: its cumulative Funding Corporation stock purchases divided by all remaining Banks’ cumulative purchases. If this would exceed a remaining Bank’s maximum, the excess is reassigned to the other remaining Bank under the same method. (C) The deficient Bank pays each assisting Bank annually from its reserve account until it has repaid the excess plus interest. Interest starts two years after the purchase and uses the recent annual average cost of funds for all Federal Home Loan Banks. The Board annually divides available reimbursement according to each assisting Bank’s share of the deficient Bank’s excess. (D) Each year, the deficient Bank must put into a Board-established reserve account the net earnings and reimbursements needed for these repayments. The account may be used only for them, and deposits may not exceed 20 percent of that year’s net earnings.

(f) Obligations.
(1) The Funding Corporation may issue bonds, notes, debentures, and similar obligations totaling no more than $30 billion. It may issue one only if the face amounts of noninterest-bearing instruments in the Principal Fund will equal the total principal of its obligations outstanding after the issue.
(2) It pays interest from these sources, in this order as needed: (A) earnings on assets not in the Principal Fund; (B) if those earnings are insufficient, the Resolution Trust Corporation pays excess liquidating dividends and claim payments identified by the Board as not presently needed for resolution costs, plus proceeds from warrants and participations it acquired; (C) if still insufficient, each Federal Home Loan Bank pays 20 percent of its yearly net earnings after section 1430(j) expenses and operating expenses. Each year the Director compares the value of those payments with the value of a $300 million annual annuity beginning on the issue date and ending at final scheduled maturity, using present-value factors chosen with the Treasury Secretary. The Director lengthens or shortens Bank payment terms so the values match. If payments extend past maturity, Banks keep paying 20 percent to the Treasury until the values match; in the final year the Director reduces the percentage proportionally if needed to pay only the remaining obligation. The Director reports twice a year to the Senate Banking, Housing, and Urban Affairs Committee and the House Financial Services Committee on the projected completion date. (D) If all earlier sources are insufficient, the FSLIC Resolution Fund transfers net proceeds from asset sales received from the Resolution Trust Corporation. (E) If still insufficient, the Treasury Secretary pays the additional interest amount. That payment becomes a Funding Corporation liability repayable on dissolution from remaining assets. Amounts needed for these payments are appropriated for fiscal year 1989 and every later fiscal year.
(3) At maturity, the Funding Corporation repays an obligation by liquidating noninterest-bearing instruments in the Principal Fund.
(4) Subject to Board-approved terms, proceeds from each obligation, less discounts plus premiums and net of issue costs, must be used to buy Resolution Trust Corporation capital certificates or refund an earlier obligation whose proceeds were transferred for that purchase.
(5) At the Board’s direction, these obligations are lawful investments and security for fiduciary, trust, and public funds controlled by the United States or its officers.
(6) Anyone authorized to invest in, sell, underwrite, buy, accept as security, or otherwise deal in Federal Home Loan Bank obligations may do the same with Funding Corporation obligations.
(7) Except for subsection (f)(7)(B), Funding Corporation obligations are exempt from tax on principal and interest to the same extent as Federal Home Loan Bank obligations under section 1433. (B) Like the Banks, the Funding Corporation is treated as a United States agency^* for the first sentence of 31 U.S.C. 3124(b).
(8) For Securities and Exchange Commission laws, these obligations are not securities issued or guaranteed by a person^* controlled, supervised, or used as an instrumentality of the United States, and are not “exempted securities” under 15 U.S.C. 78c(a)(12)(A)(i), except that they are exempted securities for 15 U.S.C. 78o. The Commission may nevertheless exempt them from Securities Act of 1933 registration by rule or order, subject to terms and conditions.
(9) The Board and Directorate must ensure that minority-owned or minority-controlled commercial banks, investment banking firms, underwriters, and bond counsel throughout the United States have a significant opportunity to participate in public or negotiated offerings.
(10) These obligations are not obligations of, and are not guaranteed as to principal by, the Federal Home Loan Bank System^*, the Banks, the United States, or the Resolution Trust Corporation. They must say so plainly. The Treasury Secretary pays their interest as this subsection requires.

(g) Assets not transferred. (1) Subject to Board rules and limits, Funding Corporation assets not needed for Resolution Trust Corporation capital certificates and not needed for current interest payments must be invested in direct United States obligations issued by the Treasury Secretary. (2) Except as provided in subsection (e)(8), amounts received under subsection (e) must be invested in and held in a separate account, the Principal Fund, in noninterest-bearing instruments that are direct United States obligations issued by the Secretary and whose face amounts are approximately equal to the total principal of Funding Corporation obligations.

(h) Miscellaneous. (1) Except for subsection (f)(7)(B), the Funding Corporation is treated as a Federal Home Loan Bank for section 1433 (as to State, municipal, and local taxes) and section 1443. (2) Federal Reserve banks may serve as its depositaries, fiscal agents, or custodians. (3) For 31 U.S.C. 9105, 9107, and 9108, it is treated as a mixed-ownership Government corporation with Government capital. (4) A civil action, suit, or proceeding involving it arises under United States law, and a United States district court has original jurisdiction. It may remove the case from State court to the District Court for the District of Columbia without bond or security.

(i) Annual report. (1) The Board must annually submit a full report on the Funding Corporation’s operations, activities, budget, receipts, and expenditures for the prior 12 months. (2) The report must include audited statements and information showing financial condition and operations under generally accepted accounting principles; financial operating plans and forecasts, including actual and future spending and cash obligations and its commitments, guarantees, and contingent liabilities; and the Comptroller General’s annual audit results under 31 U.S.C. 9105(a). (3) The Board must send it to Congress and the President as soon as practicable after the calendar year ends, no later than June 30 of the next year.

(j) Termination. (1) The Funding Corporation must be dissolved as soon as practicable after all its obligations mature and are fully paid. (2) On dissolution, the Board may exercise any Funding Corporation power it finds necessary to settle and finish the Corporation’s affairs.

(k) Definitions. (1) “Administrative expenses” excludes interest or redemption premiums on Funding Corporation obligations and issuance costs. (2) “Custodian fee” means a fee for transferring a security to, or maintaining it in, the segregated account under subsection (g), and any other expense of establishing or maintaining that account. (3) “Funding Corporation” means the Resolution Funding Corporation established in subsection (b). (4) “Funding Corporation Principal Fund” means the separate account under subsection (g)(2). (5) “Issuance costs” means issuance fees and commissions for issuing or servicing an obligation, including legal and accounting expenses, trustee and fiscal or paying-agent charges, offering-material preparation and printing costs, and advertising expenses connected with issuing an obligation. (6) “Net earnings” means Federal Home Loan Bank net earnings without subtracting chargeoffs or expenses for Financing Corporation stock or payments required under subsections (e) and (f). (7) “Thrift Depositor Protection Oversight Board” means the Resolution Trust Corporation Board under section 1441a, and after that Corporation ends, the Treasury Secretary, the Federal Reserve Board Chair, and the Housing and Urban Development Secretary. (8) “Secretary” means the Treasury Secretary. (9) “Undivided profits” means retained earnings after dividends, minus the amount required for section 1436 reserves and the amounts held by each Bank in its special dividend-stabilization reserve on December 31, 1985, as shown in section 1441(d)(7)’s table.

(l) Regulations. The Oversight Board may issue regulations needed to carry out this section.