[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 316 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 316

 To amend the Federal Deposit Insurance Act to clarify the due process 
protections applicable to directors and officers of insured depository 
 institutions and other institution-affiliated parties, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 4, 1995

 Mr. McCollum (for himself, Mr. Bachus, Mr. Castle, Mr. Sam Johnson of 
Texas, Mr. Lewis of California, Mr. Linder, and Mr. McCrery) introduced 
the following bill; which was referred to the Committee on Banking and 
                           Financial Services

_______________________________________________________________________

                                 A BILL


 
 To amend the Federal Deposit Insurance Act to clarify the due process 
protections applicable to directors and officers of insured depository 
 institutions and other institution-affiliated parties, 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.

    This Act may be cited as the ``Lending Enhancement Through 
Necessary Due Process Act''.

SEC. 2. FINDINGS.

    The Congress hereby finds the following:
            (1) Excessive and groundless litigation against innocent 
        directors and officers of failed financial institutions is 
        adversely affecting the national economy by creating an 
        environment where bankers are reluctant to make loans.
            (2) The efforts by Federal banking regulators to impose 
        liability on bank officials for good faith business decisions 
        is impeding our banking system by making it difficult for 
        financial institutions to attract officers and directors.
            (3) Since 1989, Federal regulators have used enhanced 
        powers to pursue not only culpable individuals but also 
        countless innocent people who are targeted because of their 
        financial condition.
            (4) Tactics used by regulators to induce settlements 
        include the threat of attachment of assets and the use of 
        taxpayer-funded outside fee counsel to file lawsuits, the costs 
        of which often bankrupt individuals trying to clear their 
        names.
            (5) Reform of the banking laws are needed to curtail 
        regulatory abuse and to ensure that directors and officers have 
        due process protections and the ability to make good faith 
        lending decisions.

SEC. 3. FACTORS AND STANDARDS FOR CERTAIN ENFORCEMENT PROCEEDINGS.

    Section 8(i) of the Federal Deposit Insurance Act (12 U.S.C. 1818) 
is amended by adding at the end the following new paragraphs:
            ``(5) Affirmative defenses applicable with respect to 
        certain administrative and judicial proceedings.--In the 
        determination of whether any director, officer, or institution-
        affiliated party of an insured depository institution has 
        committed any violation or breach of duty for purposes of this 
        section or section 11(k), the following affirmative defenses 
        shall be available to the director, officer, or institution-
        affiliated party in any civil action against the director, 
        officer, or party before a Federal banking agency or a court of 
        jurisdiction:
                    ``(A) Business judgment.--A director, officer, or 
                institution-affiliated party of an insured depository 
                institution shall not be deemed to have committed any 
                violation or breach of duty in the making of any 
                business judgment (without regard to whether such 
                business judgment is later determined to have been in 
                error), if--
                            ``(i) in a case in which the director, 
                        officer, or institution-affiliated party had an 
                        interest in the subject of the business 
                        judgment, the director, officer, or party--
                                    ``(I) disclosed that interest at or 
                                before the time the business judgment 
                                was made; or
                                    ``(II) abstained from any vote 
                                taken in connection with such business 
                                judgment or from otherwise 
                                participating in making the business 
                                judgment;
                            ``(ii) at or before the time the business 
                        judgment was made, the director, officer, or 
                        institution-affiliated party made such inquiry 
                        about the subject of the business judgment as a 
                        reasonably prudent person would have made under 
                        the circumstances;
                            ``(iii) after being put on reasonable 
                        notice of a need to act, the director, officer, 
                        or institution-affiliated party took such 
                        actions as a reasonably prudent person would 
                        have taken under the circumstances; and
                            ``(iv) the director, officer, or 
                        institution-affiliated party acted in good 
                        faith.
                    ``(B) Regulatory approval.--A director, officer, or 
                institution-affiliated party of an insured depository 
                institution shall not be deemed to have committed any 
                violation or breach of duty if any examiner or other 
                representative of an appropriate Federal banking agency 
                or State bank supervisor, upon full and accurate 
                disclosure of the relevant facts, approved the good 
                faith practice, action, or omission which is alleged to 
                be the violation or breach, whether or not such 
                approval was communicated to the director, officer, or 
                institution-affiliated party or any other person at 
                such institution.
                    ``(C) Unforeseeable economic conditions.--A 
                director, officer, or institution-affiliated party of 
                an insured depository institution shall not be deemed 
                to have committed any violation or breach of duty if--
                            ``(i) unforeseeable economic conditions, 
                        which develop after the occurrence of the 
                        practice, action, or omission which is alleged 
                        to be a violation or breach, were the proximate 
                        cause of any loss experienced by the 
                        institution; and
                            ``(ii) the director, officer, or 
                        institution-affiliated party acted in good 
                        faith.
            ``(6) Minimum standard for order of production of personal 
        financial information.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a Federal banking agency, including 
                the Resolution Trust Corporation in such corporation's 
                capacity as conservator or receiver of an insured 
                depository institution, may not seek to obtain, 
                directly or indirectly, and no court (with respect to 
                any request from any such agency or corporation) may 
                order the production of, the personal financial records 
                of any person for the agency unless the head of the 
                agency or corporation (or the designee of the head of 
                the agency or corporation), submits a written finding 
                which is disclosed to such person and certified to an 
                appropriate court of jurisdiction, and the court 
                through a de novo finding determines, that the agency 
                has reasonable cause to believe that--
                            ``(i) the person whose records are being 
                        sought has committed a violation for which a 
                        civil penalty may be imposed under paragraph 
                        (2) or has breached a duty owed to an insured 
                        depository institution; and
                            ``(ii) the person's financial condition is 
                        undergoing or is likely, within 6 months of the 
                        date of the request for the production of 
                        financial records, to undergo a material 
                        change.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                with respect to a request for the production of 
                financial records by an appropriate Federal banking 
                agency of any person--
                            ``(i) in connection with an investigation 
                        of the person by the agency pursuant to section 
                        7(j); or
                            ``(ii) after an administrative or judicial 
                        determination, on a record after opportunity 
                        for agency hearing, that the person has 
                        committed a violation for which a civil penalty 
                        may be assessed under paragraph (2).''.

SEC. 4. DUE PROCESS PROTECTIONS RELATING TO ATTACHMENT OF ASSETS.

    Section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) is 
amended--
            (1) by striking subsection (i)(4)(B) and inserting the 
        following new subparagraph:
                    ``(B) Standard.--
                            ``(i) Showing.--Rule 65 of the Federal 
                        Rules of Civil Procedure shall apply with 
                        respect to any proceeding under subparagraph 
                        (A).
                            ``(ii) State proceeding.--If, in the case 
                        of any proceeding in a State court, the court 
                        determines that rules of civil procedure 
                        available under the laws of such State provide 
                        substantially similar protections to such 
                        party's right to due process as Rule 65 of the 
                        Federal Rules of Civil Procedure, the relief 
                        sought under subparagraph (A) may be requested 
                        under the laws of such State.''; and
            (2) in subsection (b), by adding at the end the following 
        new paragraph:
            ``(10) Standard for certain orders.--No authority under 
        this subsection or subsection (c) to prohibit any institution-
        affiliated party from withdrawing, transferring, removing, 
        dissipating, or disposing of any funds, assets, or other 
        property may be exercised unless the agency meets the standards 
        of Rule 65 of the Federal Rules of Civil Procedure.''.

SEC. 5. DIRECTOR AND OFFICER LIABILITY.

    Section 11(k) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(k)) is amended by adding at the end the following new sentence: 
``Notwithstanding the preceding sentence, a civil action for monetary 
damages for losses due to a disregard of a duty of care may not be 
brought against any director or officer of any insured depository 
institution by the Corporation in any capacity described in clause (1), 
(2), or (3) of the 1st sentence of this subsection under any provision 
of State law, unless the standard of disregard required to be 
demonstrated under such provision of law is as great or greater than 
the standard described in the 1st sentence.''.

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