[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2056 Enrolled Bill (ENR)]
H.R.2056
One Hundred Twelfth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the fifth day of January, two thousand and eleven
An Act
To instruct the Inspector General of the Federal Deposit Insurance
Corporation to study the impact of insured depository institution
failures, 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. INSPECTOR GENERAL STUDY.
(a) Study.--The Inspector General of the Federal Deposit Insurance
Corporation (FDIC) shall conduct a comprehensive study on the impact of
the failure of insured depository institutions.
(b) Definitions.--For purposes of this Act--
(1) the term ``insured depository institution'' has the meaning
given such term in section 3(c) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(c)); and
(2) the term ``private equity company'' has the meaning given
the terms ``hedge fund'' and ``private equity fund'' in section
13(h)(2) of the Bank Holding Company Act of 1956 (12 U.S.C.
1851(h)(2)).
(c) Matters To Be Studied.--In conducting the study under this
section, the Inspector General shall address the following:
(1) Loss-sharing agreements.--The effect of loss-sharing
agreements (LSAs), including--
(A) the impact of loss-sharing on the insured depository
institutions that survive and the borrowers of insured
depository institutions that fail, including--
(i) the impact on the rate of loan modifications and
adjustments;
(ii) whether more types of loans (such as commercial
(including land development and 1- to 4-family residential
and commercial construction loans), residential, or small
business loans) could be modified with fewer LSAs, or if
LSAs could be phased out altogether;
(iii) the FDIC's policies and procedures for monitoring
LSAs, including those designed to ensure institutions are
not imprudently selling assets at a depressed value;
(iv) the impact on the availability of credit; and
(v) the impact on loans with participation agreements
outstanding with other insured depository institutions;
(B) the FDIC's policies and procedures for terminating LSAs
and mitigating the risk of acquiring institutions having
substantial assets remaining in their portfolio when the LSAs
are due to expire;
(C) the extent to which LSAs provide incentives for loan
modifications and other means of increasing the probability of
commercial assets being considered ``performing'';
(D) the nature and extent of differences for modifying
residential assets and working out commercial real estate under
LSAs; and
(E) methods of ensuring the orderly end of expiring LSAs to
prevent any adverse impact on borrowing, real estate industry
and the Depositors Insurance Fund.
(2) Losses.--The significance of losses, including--
(A) the number of insured depository institutions that have
been placed into receivership or conservatorship due to
significant losses arising from loans for which all payments of
principal, interest, and fees were current, according to the
contractual terms of the loans;
(B) the impact of significant losses arising from loans for
which all payments of principal, interest, and fees were
current, according to the contractual terms of the loans, on
the ability of insured depository institutions to raise
additional capital;
(C) the effect of changes in the application of fair value
accounting rules and other accounting standards, including the
allowance for loan and lease loss methodology, on insured
depository institutions, specifically the degree to which fair
value accounting rules and other accounting standards have led
to regulatory action against banks, including consent orders
and closure of the institution; and
(D) whether field examiners are using appropriate appraisal
procedures with respect to losses arising from loans for which
all payments of principal, interest, and fees were current,
according to the contractual terms of the loans, and whether
the application of appraisals leads to immediate write downs on
the value of the underlying asset.
(3) Appraisals.--
(A) The number of insured depository institutions placed
into receivership or conservatorship due to asset write-downs
and the policies and procedures for evaluating the adequacy of
an insured depository institution's allowance for loan and
lease losses.
(B) The policies and procedures examiners use for
evaluating the appraised values of property securing real
estate loans and the extent to which those policies and
procedures are followed.
(C) FDIC field examiner implementation of guidance issued
December 2, 2010, titled ``Agencies Issue Final Appraisal and
Evaluation Guidelines''.
(4) Capital.--
(A) The factors that examiners use to assess the adequacy
of capital at insured depository institutions, including the
extent to which the quality and risk profile of the insured
institution's loan portfolio is considered in the examiners'
assessment.
(B) The number of applications received by the FDIC from
private capital investors to acquire insured depository
institutions in receivership, the factors used by the FDIC in
evaluating the applications, and the number of applications
that have been approved or not approved, including the reasons
pertaining thereto.
(C) The policies and procedures associated with the
evaluation of potential private investments in insured
depository institutions and the extent to which those policies
and procedures are followed.
(5) Workouts.--The success of FDIC field examiners in
implementing FDIC guidelines titled ``Policy Statement on Prudent
Commercial Real Estate Loan Workouts'' (October 31, 2009) regarding
workouts of commercial real estate, including--
(A) whether field examiners are using the correct
appraisals; and
(B) whether there is any difference in implementation
between residential workouts and commercial (including land
development and 1- to 4-family residential and commercial
construction loans) workouts.
(6) Orders.--The application and impact of consent orders and
cease and desist orders, including--
(A) whether such orders have been applied uniformly and
fairly across all insured depository institutions;
(B) the reasons for failing to apply such orders uniformly
and fairly when such failure occurs;
(C) the impact of such orders on the ability of insured
depository institutions to raise capital;
(D) the impact of such orders on the ability of insured
depository institutions to extend or modify credit to existing
and new borrowers; and
(E) whether individual insured depository institutions have
improved enough to have such orders removed.
(7) FDIC policy.--The application and impact of FDIC policies,
including--
(A) the impact of FDIC policies on the investment in
insured depository institutions, especially in States where
more than 10 such institutions have failed since 2008;
(B) whether the FDIC fairly and consistently applies
capital standards when an insured depository institution is
successful in raising private capital; and
(C) whether the FDIC steers potential investors away from
insured depository institutions that may be in danger of being
placed in receivership or conservatorship.
(8) Private equity companies.--The FDIC's handling of potential
investment from private equity companies in insured depository
institutions, including--
(A) the number of insured depository institutions that have
been approved to receive private equity investment by the FDIC;
(B) the number of insured depository institutions that have
been rejected from receiving private equity investment by the
FDIC; and
(C) the reasons for rejection of private equity investment
when such rejection occurs.
(d) Report.--Not later than 1 year after the date of the enactment
of this Act, the Inspector General shall submit to Congress a report--
(1) on the results of the study conducted pursuant to this
section; and
(2) any recommendations based on such study.
(e) Coordination Between FDIC IG, Treasury IG, and Federal Reserve
IG.--In carrying out this section, the Inspector General of the FDIC
shall consult with the Inspectors General of the Treasury and of the
Federal Reserve System, and such Inspectors General shall provide any
documents or other material requested by the Inspector General of the
FDIC in order to carry out this section.
SEC. 2. CONGRESSIONAL TESTIMONY.
The Inspector General of the Federal Deposit Insurance Corporation
and the Comptroller General of the United States shall appear before
the Committee on Banking, Housing, and Urban Affairs of the Senate and
the Committee on Financial Services of the House of Representatives,
not later than 150 days after the date of publication of the study
required under this Act to discuss the outcomes and impact of Federal
regulations on bank examinations and failures.
SEC. 3. GAO STUDY.
(a) Study.--The Comptroller General of the United States shall
carry out a study on the following:
(1) The causes of high levels of bank failures in States with
10 or more failures since 2008.
(2) The procyclical impact of fair value accounting standards.
(3) The causes and potential solutions for the ``vicious
cycle'' of loan write downs, raising capital, and failures.
(4) An analysis of the community impact of bank failures.
(5) The feasibility and overall impact of loss share
agreements.
(b) Report.--Not later than the end of the 1-year period beginning
on the date of the enactment of this Act, the Comptroller General shall
issue a report to the Congress on the study carried out pursuant to
subsection (a).
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.