Federal Housing Finance Agency.
Notice of proposed rulemaking.
The Federal Housing Finance Agency (FHFA) is proposing to amend its regulations relating to the process by which successor directors are chosen after a Federal Home Loan Bank (Bank) directorship is redesignated to a new state prior to the end of its term as a result of the annual designation of Bank directorships. The current rules deem the redesignation to create a vacancy on the board, which is filled by the remaining directors. The proposed amendment would deem the redesignation to cause the original directorship to terminate and a new directorship to be created, which would then be filled by an election of the members.
Written comments on the proposed amendment must be received on or before December 31, 2009. For additional information, see SUPPLEMENTARY INFORMATION.
You may submit your comments on the proposed amendment, identified by regulatory information number “RIN 2590-AA03,” by any of the following methods:
- U.S. Mail, United Parcel Post, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA03, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552.
- Hand Delivered/Courier: The hand delivery address is: Alfred M. Pollard, General Counsel; Attention: Comments/RIN 2590-AA03, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The package should be logged at the Guard Desk, First Floor, on business days between 9 a.m. and 5 p.m.
- E-mail: Comments to Alfred M. Pollard, General Counsel, may be sent by e-mail to RegComments@fhfa.gov. Please include “RIN 2590-AA03” in the subject line of the message.
- Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by e-mail to FHFA at RegComments@fhfa.gov to ensure timely receipt by the agency. Include the following information in the subject line of your submission: Comments/RIN 2590-AA03.
FOR FURTHER INFORMATION CONTACT:
Janice A. Kaye, Associate General Counsel, firstname.lastname@example.org, (202) 343-1514 or Patricia L. Sweeney, Management Analyst, email@example.com, (202) 408-2872, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The telephone number for the Telecommunications Device for the Deaf is (800) 877-8339.End Further Info End Preamble Start Supplemental Information
FHFA invites comments on all aspects of the proposed amendment and will take all comments into consideration in determining whether further modifications are appropriate. Copies of all comments will be posted without change, including any personal information you provide, such as your name and address, on the FHFA Web site at http://www.fhfa.gov. In addition, copies of all comments received will be available for examination by the public on business days between the hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an appointment to inspect comments, please call the Office of General Counsel at (202) 414-3751.
The Housing and Economic Recovery Act of 2008 (HERA), Public Law 110-289, 122 Stat. 2654, established FHFA as an independent agency of the Federal Government to oversee the prudential operations of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation (collectively, the Enterprises), and the Banks (collectively, the Regulated Entities). FHFA ensures that the Regulated Entities operate in a safe and sound manner, including being adequately capitalized; foster liquid, efficient, competitive and resilient national housing finance markets; comply with applicable statutes, rules, regulations, and orders; and carry out their missions through authorized activities. FHFA also ensures that the activities and operations of the Regulated Entities are consistent with the public interest.
Section 1202 of HERA amended section 7 of the Federal Home Loan Bank Act (Bank Act), 12 U.S.C. 1427, which governs the eligibility and election of individuals to serve on the boards of directors of the 12 Banks. FHFA published an interim final rule and request for comments to implement section 1202 of HERA. See 73 FR 55710 (September 26, 2008). After considering the comments it received, FHFA published a final rule. See 74 FR 51452 (October 7, 2009). In the supplementary information to that final rule, FHFA noted that it had identified an issue relating to the redesignation of directorships to another state prior to the end of their terms of office, which it planned to address in a separate rulemaking because it would involve a change of agency policy. This proposed rule addresses that issue.
III. Discussion of the Proposed Rule
With certain limited exceptions, the Bank Act requires that member directorships be allocated among the states of each Bank district in proportion to the amount of Bank stock owned by the members located in each state, and requires the Director to conduct an annual “designation of directorships” to allocate each member directorship to a particular state. If the amount of Bank stock owned by members in one state changes relative to the amount of stock owned by members in another state from one year to the next, some member directorships may be re-allocated to another state, even if their terms have not expired. Under the rules of the Federal Housing Finance Board (Finance Board), a redesignated directorship with one or more years of its term remaining continued to exist, but became vacant as of the end of the Start Printed Page 62709year because the incumbent no longer satisfied the statutory requirement that each member director be an officer or director of a member located in the state represented by the directorship. The board of directors of the Bank would elect a replacement director from the newly designated state to fill the directorship for the remainder of the term of office. Section 1261.4(d) of the final rule carried forward the Finance Board practice, although the supplementary information noted that FHFA intended to address this issue in a separate rulemaking.
Notwithstanding the Finance Board's policy, FHFA believes that the relevant provisions of the Bank Act also would allow FHFA to deem any redesignated member directorship to terminate as of the end of the year in which it is designated to another state. Under that interpretation, FHFA would create a new directorship to replace the terminated directorship and would allocate the new directorship to the state gaining a directorship under the annual designation of directorships. The principal effect of such a change in agency policy would be that the newly created directorship would be filled by an election of the members in the newly designated state, rather than by the Bank's board of directors. FHFA anticipates that any such newly created directorship would be assigned a shortened term of office that corresponds to the amount of time remaining on the term of office for the terminated directorship. Although a directorship ordinarily has a term of four years, assigning a four year term to a newly created directorship would disrupt the existing staggering of the terms on the board of the Bank. Section 7(d) of the Bank Act, however, authorizes the Director to adjust the terms of any directors “first elected after the date of enactment” of HERA to ensure that the board remains appropriately staggered. Because any individual elected by the members to fill such a new directorship would be the first to be elected to that directorship, FHFA believes that section 7(d) authorizes the Director to adjust the term of any such directorships to correspond to the amount of time remaining on the term of the previous directorship. Doing so would maintain the appropriate staggering of the directorships, and FHFA believes that this treatment better serves both the language in section 7(d) and the intent of Congress.
In order to implement this change in policy, FHFA is proposing to modify or eliminate several provisions in part 1261 of its regulations, as those provisions have been most recently amended by the final rule published on October 7, 2009 at 74 FR 51452. Specifically, FHFA is proposing to make the following changes to part 1261:
1. All but the first sentence in § 1261.3(d) would be removed because it no longer would be applicable. The removed language provides that a seat redesignated to another state will be deemed vacant rather than extinguished.
2. New § 1261.3(e) would provide that, in the event of redesignation of a member directorship from one state to another, the directorship in the previous state would terminate, and a new directorship would begin in the successor state, which would be filled by vote of the members in that state and would have a term equal in length to the remaining term of the terminated directorship, in order to maintain the staggering of director terms.
3. Section 1261.4(e)(1) would be revised in two respects. All references to “redesignation” of a directorship from one state to another would be removed, because that is not what occurs when a directorship ceases in one state at the time that a directorship begins in another state. In addition, the last sentence would be deleted. That sentence provides that any directorship that ceases in one state before its time expires, because it is either eliminated or moved to another state, shall not be a full-term directorship that counts toward the three-term limit provided in section 7(d) of the Bank Act. Under section 7(d), a term is counted for term limits if a director was elected to a full term, regardless of whether he or she serves a full term.
4. Section 1261.4(e)(2) would be removed because it no longer would be applicable. It is the paragraph that provides that a relocated directorship will be filled by the board of directors.
Section 1201 of HERA (codified at 12 U.S.C. 4513(f)) requires the Director, when promulgating regulations relating to the Banks, to consider the differences between the Banks and the Enterprises with respect to the Banks' cooperative ownership structure; mission of providing liquidity to members; affordable housing and community development mission; capital structure; and joint and several liability. The Director may also consider any other differences that are deemed appropriate. In preparing this proposed rule, the Director considered the differences between the Banks and the Enterprises as they relate to the above factors. The Director requests comments from the public about whether differences related to these factors should result in a revision of the proposed amendment as it relates to the Banks.
IV. Paperwork Reduction Act
The proposed amendment does not contain any information collection requirement that requires the approval of OMB under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include an initial regulatory flexibility analysis describing the regulation's impact on small entities. Such an analysis need not be undertaken if the agency has certified that the regulation will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). FHFA has considered the impact of the proposed amendment under the Regulatory Flexibility Act. FHFA certifies that the proposed amendment is not likely to have a significant economic impact on a substantial number of small business entities because the regulation is applicable only to the Banks, which are not small entities for the purposes of the Regulatory Flexibility Act.Start List of Subjects
List of Subjects in 12 CFR Part 1261
- Conflicts of interest
- Ethical conduct
- Federal home loan banks
- Financial disclosure
- Reporting and recordkeeping requirements
For the reasons stated in the preamble, under the authority of 12 U.S.C. 1426, 1427, 1432, 4511 and 4526, the Federal Housing Finance Agency proposes to amend Subpart A of part 1261 of Title 12 CFR Chapter XII as follows:Start Part
PART 1261—FEDERAL HOME LOAN BANK DIRECTORS
Subpart A—Federal Home Loan Bank Boards of Directors: Eligibility and Elections
1. The authority citation for part 1261 continues to read as follows:
2. Amend § 1261.3 by revising paragraph (d) and adding new paragraph (e) to read as follows:
(d) Notification. On or before June 1 of each year, FHFA will notify each Start Printed Page 62710Bank in writing of the total number of directorships established for the Bank and the number of member directorships designated as representing the members in each voting state in the Bank district.
(e) Change of state. If the annual designation of member directorships results in an existing directorship being redesignated as representing members in a different State, that directorship shall be deemed to terminate in the previous State as of December 31 of that year, and a new directorship to begin in the succeeding State as of January 1 of the next year. The new directorship shall be filled by vote of the members in the succeeding State and, in order to maintain the staggered terms of directorships, shall have a term equal to the remaining term of the previous directorship if it had not been redesignated to another State.
3. Amend § 1261.4 by revising paragraph (e) to read as follows:
(e) Loss of eligibility. A director shall become ineligible to remain in office if, during his or her term of office, the directorship to which he or she has been elected is eliminated. The incumbent director shall become ineligible after the close of business on December 31 of the year in which the directorship is eliminated.
Dated: November 20, 2009.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. E9-28716 Filed 11-30-09; 8:45 am]
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