[Congressional Record (Bound Edition), Volume 162 (2016), Part 3]
[House]
[Pages 4051-4056]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              {time}  1645
              FINANCIAL INSTITUTION BANKRUPTCY ACT OF 2016

  Mr. GOODLATTE. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 2947) to amend title 11 of the United States Code in order 
to facilitate the resolution of an insolvent financial institution in 
bankruptcy, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 2947

       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 ``Financial Institution 
     Bankruptcy Act of 2016''.

     SEC. 2. GENERAL PROVISIONS RELATING TO COVERED FINANCIAL 
                   CORPORATIONS.

       (a) Definition.--Section 101 of title 11, United States 
     Code, is amended by inserting the following after paragraph 
     (9):
       ``(9A) The term `covered financial corporation' means any 
     corporation incorporated or organized under any Federal or 
     State law, other than a stockbroker, a commodity broker, or 
     an entity of the kind specified in paragraph (2) or (3) of 
     section 109(b), that is--
       ``(A) a bank holding company, as defined in section 2(a) of 
     the Bank Holding Company Act of 1956; or
       ``(B) a corporation that exists for the primary purpose of 
     owning, controlling and financing its subsidiaries, that has 
     total consolidated assets of $50,000,000,000 or greater, and 
     for which, in its most recently completed fiscal year--
       ``(i) annual gross revenues derived by the corporation and 
     all of its subsidiaries from activities that are financial in 
     nature (as defined in section 4(k) of the Bank Holding 
     Company Act of 1956) and, if applicable, from the ownership 
     or control of one or more insured depository institutions, 
     represents 85 percent or more of the consolidated annual 
     gross revenues of the corporation; or
       ``(ii) the consolidated assets of the corporation and all 
     of its subsidiaries related to activities that are financial 
     in nature (as defined in section 4(k) of the Bank Holding 
     Company Act of 1956) and, if applicable, related to the 
     ownership or control of one or more insured depository 
     institutions, represents 85 percent or more of the 
     consolidated assets of the corporation.''.
       (b) Applicability of Chapters.--Section 103 of title 11, 
     United States Code, is amended by adding at the end the 
     following:
       ``(l) Subchapter V of chapter 11 of this title applies only 
     in a case under chapter 11 concerning a covered financial 
     corporation.''.
       (c) Who May Be a Debtor.--Section 109 of title 11, United 
     States Code, is amended--
       (1) in subsection (b)--
       (A) in paragraph (2), by striking ``or'' at the end;
       (B) in paragraph (3)(B), by striking the period at the end 
     and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(4) a covered financial corporation.''; and
       (2) in subsection (d)--
       (A) by striking ``and'' before ``an uninsured State member 
     bank'';
       (B) by striking ``or'' before ``a corporation''; and
       (C) by inserting ``, or a covered financial corporation'' 
     after ``Federal Deposit Insurance Corporation Improvement Act 
     of 1991''.
       (d) Conversion to Chapter 7.--Section 1112 of title 11, 
     United States Code, is amended by adding at the end the 
     following:
       ``(g) Notwithstanding section 109(b), the court may convert 
     a case under subchapter V to a case under chapter 7 if--
       ``(1) a transfer approved under section 1185 has been 
     consummated;
       ``(2) the court has ordered the appointment of a special 
     trustee under section 1186; and
       ``(3) the court finds, after notice and a hearing, that 
     conversion is in the best interest of the creditors and the 
     estate.''.
       (e)(1) Section 726(a)(1) of title 11, United States Code, 
     is amended by inserting after ``first,'' the following: ``in 
     payment of any unpaid fees, costs, and expenses of a special 
     trustee appointed under section 1186, and then''.
       (2) Section 1129(a) of title 11, United States Code, is 
     amended by inserting after paragraph (16) the following:
       ``(17) In a case under subchapter V, all payable fees, 
     costs, and expenses of the special trustee have been paid or 
     the plan provides for the payment of all such fees, costs, 
     and expenses on the effective date of the plan.
       ``(18) In a case under subchapter V, confirmation of the 
     plan is not likely to cause serious adverse effects on 
     financial stability in the United States.''.
       (f) Section 322(b)(2) of title 11, United States Code, is 
     amended by striking ``The'' and inserting ``In cases under 
     subchapter V, the United States trustee shall recommend to 
     the court, and in all other cases, the''.

     SEC. 3. LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A 
                   COVERED FINANCIAL CORPORATION.

       Chapter 11 of title 11, United States Code, is amended by 
     adding at the end the following:

[[Page 4052]]



 ``SUBCHAPTER V--LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A 
                     COVERED FINANCIAL CORPORATION

     ``Sec. 1181. Inapplicability of other sections

       ``Sections 303 and 321(c) do not apply in a case under this 
     subchapter concerning a covered financial corporation. 
     Section 365 does not apply to a transfer under section 1185, 
     1187, or 1188.

     ``Sec. 1182. Definitions for this subchapter

       ``In this subchapter, the following definitions shall 
     apply:
       ``(1) The term `Board' means the Board of Governors of the 
     Federal Reserve System.
       ``(2) The term `bridge company' means a newly formed 
     corporation to which property of the estate may be 
     transferred under section 1185(a) and the equity securities 
     of which may be transferred to a special trustee under 
     section 1186(a).
       ``(3) The term `capital structure debt' means all unsecured 
     debt of the debtor for borrowed money for which the debtor is 
     the primary obligor, other than a qualified financial 
     contract and other than debt secured by a lien on property of 
     the estate that is to be transferred to a bridge company 
     pursuant to an order of the court under section 1185(a).
       ``(4) The term `contractual right' means a contractual 
     right of a kind defined in section 555, 556, 559, 560, or 
     561.
       ``(5) The term `qualified financial contract' means any 
     contract of a kind defined in paragraph (25), (38A), (47), or 
     (53B) of section 101, section 741(7), or paragraph (4), (5), 
     (11), or (13) of section 761.
       ``(6) The term `special trustee' means the trustee of a 
     trust formed under section 1186(a)(1).

     ``Sec. 1183. Commencement of a case concerning a covered 
       financial corporation

       ``(a) A case under this subchapter concerning a covered 
     financial corporation may be commenced by the filing of a 
     petition with the court by the debtor under section 301 only 
     if the debtor states to the best of its knowledge under 
     penalty of perjury in the petition that it is a covered 
     financial corporation.
       ``(b) The commencement of a case under subsection (a) 
     constitutes an order for relief under this subchapter.
       ``(c) The members of the board of directors (or body 
     performing similar functions) of a covered financial company 
     shall have no liability to shareholders, creditors, or other 
     parties in interest for a good faith filing of a petition to 
     commence a case under this subchapter, or for any reasonable 
     action taken in good faith in contemplation of or in 
     connection with such a petition or a transfer under section 
     1185 or section 1186, whether prior to or after commencement 
     of the case.
       ``(d) Counsel to the debtor shall provide, to the greatest 
     extent practicable without disclosing the identity of the 
     potential debtor, sufficient confidential notice to the chief 
     judge of the court of appeals for the circuit embracing the 
     district in which such counsel intends to file a petition to 
     commence a case under this subchapter regarding the potential 
     commencement of such case. The chief judge of such court 
     shall randomly assign to preside over such case a bankruptcy 
     judge selected from among the bankruptcy judges designated by 
     the Chief Justice of the United States under section 298 of 
     title 28.

     ``Sec. 1184. Regulators

       ``The Board, the Securities Exchange Commission, the Office 
     of the Comptroller of the Currency of the Department of the 
     Treasury, the Commodity Futures Trading Commission, and the 
     Federal Deposit Insurance Corporation may raise and may 
     appear and be heard on any issue in any case or proceeding 
     under this subchapter.

     ``Sec. 1185. Special transfer of property of the estate

       ``(a) On request of the trustee, and after notice and a 
     hearing that shall occur not less than 24 hours after the 
     order for relief, the court may order a transfer under this 
     section of property of the estate, and the assignment of 
     executory contracts, unexpired leases, and qualified 
     financial contracts of the debtor, to a bridge company. Upon 
     the entry of an order approving such transfer, any property 
     transferred, and any executory contracts, unexpired leases, 
     and qualified financial contracts assigned under such order 
     shall no longer be property of the estate. Except as provided 
     under this section, the provisions of section 363 shall apply 
     to a transfer and assignment under this section.
       ``(b) Unless the court orders otherwise, notice of a 
     request for an order under subsection (a) shall consist of 
     electronic or telephonic notice of not less than 24 hours 
     to--
       ``(1) the debtor;
       ``(2) the holders of the 20 largest secured claims against 
     the debtor;
       ``(3) the holders of the 20 largest unsecured claims 
     against the debtor;
       ``(4) counterparties to any debt, executory contract, 
     unexpired lease, and qualified financial contract requested 
     to be transferred under this section;
       ``(5) the Board;
       ``(6) the Federal Deposit Insurance Corporation;
       ``(7) the Secretary of the Treasury and the Office of the 
     Comptroller of the Currency of the Treasury;
       ``(8) the Commodity Futures Trading Commission;
       ``(9) the Securities and Exchange Commission;
       ``(10) the United States trustee or bankruptcy 
     administrator; and
       ``(11) each primary financial regulatory agency, as defined 
     in section 2(12) of the Dodd-Frank Wall Street Reform and 
     Consumer Protection Act, with respect to any affiliate the 
     equity securities of which are proposed to be transferred 
     under this section.
       ``(c) The court may not order a transfer under this section 
     unless the court determines, based upon a preponderance of 
     the evidence, that--
       ``(1) the transfer under this section is necessary to 
     prevent serious adverse effects on financial stability in the 
     United States;
       ``(2) the transfer does not provide for the assumption of 
     any capital structure debt by the bridge company;
       ``(3) the transfer does not provide for the transfer to the 
     bridge company of any property of the estate that is subject 
     to a lien securing a debt, executory contract, unexpired 
     lease or agreement (including a qualified financial contract) 
     of the debtor unless--
       ``(A)(i) the bridge company assumes such debt, executory 
     contract, unexpired lease or agreement (including a qualified 
     financial contract), including any claims arising in respect 
     thereof that would not be allowed secured claims under 
     section 506(a)(1) and after giving effect to such transfer, 
     such property remains subject to the lien securing such debt, 
     executory contract, unexpired lease or agreement (including a 
     qualified financial contract); and
       ``(ii) the court has determined that assumption of such 
     debt, executory contract, unexpired lease or agreement 
     (including a qualified financial contract) by the bridge 
     company is in the best interests of the estate; or
       ``(B) such property is being transferred to the bridge 
     company in accordance with the provisions of section 363;
       ``(4) the transfer does not provide for the assumption by 
     the bridge company of any debt, executory contract, unexpired 
     lease or agreement (including a qualified financial contract) 
     of the debtor secured by a lien on property of the estate 
     unless the transfer provides for such property to be 
     transferred to the bridge company in accordance with 
     paragraph (3)(A) of this subsection;
       ``(5) the transfer does not provide for the transfer of the 
     equity of the debtor;
       ``(6) the trustee has demonstrated that the bridge company 
     is not likely to fail to meet the obligations of any debt, 
     executory contract, qualified financial contract, or 
     unexpired lease assumed and assigned to the bridge company;
       ``(7) the transfer provides for the transfer to a special 
     trustee all of the equity securities in the bridge company 
     and appointment of a special trustee in accordance with 
     section 1186;
       ``(8) after giving effect to the transfer, adequate 
     provision has been made for the fees, costs, and expenses of 
     the estate and special trustee; and
       ``(9) the bridge company will have governing documents, and 
     initial directors and senior officers, that are in the best 
     interest of creditors and the estate.
       ``(d) Immediately before a transfer under this section, the 
     bridge company that is the recipient of the transfer shall--
       ``(1) not have any property, executory contracts, unexpired 
     leases, qualified financial contracts, or debts, other than 
     any property acquired or executory contracts, unexpired 
     leases, or debts assumed when acting as a transferee of a 
     transfer under this section; and
       ``(2) have equity securities that are property of the 
     estate, which may be sold or distributed in accordance with 
     this title.

     ``Sec. 1186. Special trustee

       ``(a)(1) An order approving a transfer under section 1185 
     shall require the trustee to transfer to a qualified and 
     independent special trustee, who is appointed by the court, 
     all of the equity securities in the bridge company that is 
     the recipient of a transfer under section 1185 to hold in 
     trust for the sole benefit of the estate, subject to 
     satisfaction of the special trustee's fees, costs, and 
     expenses. The trust of which the special trustee is the 
     trustee shall be a newly formed trust governed by a trust 
     agreement approved by the court as in the best interests of 
     the estate, and shall exist for the sole purpose of holding 
     and administering, and shall be permitted to dispose of, the 
     equity securities of the bridge company in accordance with 
     the trust agreement.
       ``(2) In connection with the hearing to approve a transfer 
     under section 1185, the trustee shall confirm to the court 
     that the Board has been consulted regarding the identity of 
     the proposed special trustee and advise the court of the 
     results of such consultation.
       ``(b) The trust agreement governing the trust shall 
     provide--
       ``(1) for the payment of the fees, costs, expenses, and 
     indemnities of the special trustee from the assets of the 
     debtor's estate;
       ``(2) that the special trustee provide--
       ``(A) quarterly reporting to the estate, which shall be 
     filed with the court; and
       ``(B) information about the bridge company reasonably 
     requested by a party in interest to prepare a disclosure 
     statement for a plan providing for distribution of any 
     securities of the bridge company if such information is 
     necessary to prepare such disclosure statement;
       ``(3) that for as long as the equity securities of the 
     bridge company are held by the trust, the special trustee 
     shall file a notice with the court in connection with--
       ``(A) any change in a director or senior officer of the 
     bridge company;
       ``(B) any modification to the governing documents of the 
     bridge company; and

[[Page 4053]]

       ``(C) any material corporate action of the bridge company, 
     including--
       ``(i) recapitalization;
       ``(ii) a material borrowing;
       ``(iii) termination of an intercompany debt or guarantee;
       ``(iv) a transfer of a substantial portion of the assets of 
     the bridge company; or
       ``(v) the issuance or sale of any securities of the bridge 
     company;
       ``(4) that any sale of any equity securities of the bridge 
     company shall not be consummated until the special trustee 
     consults with the Federal Deposit Insurance Corporation and 
     the Board regarding such sale and discloses the results of 
     such consultation with the court;
       ``(5) that, subject to reserves for payments permitted 
     under paragraph (1) provided for in the trust agreement, the 
     proceeds of the sale of any equity securities of the bridge 
     company by the special trustee be held in trust for the 
     benefit of or transferred to the estate;
       ``(6) the process and guidelines for the replacement of the 
     special trustee; and
       ``(7) that the property held in trust by the special 
     trustee is subject to distribution in accordance with 
     subsection (c).
       ``(c)(1) The special trustee shall distribute the assets 
     held in trust--
       ``(A) if the court confirms a plan in the case, in 
     accordance with the plan on the effective date of the plan; 
     or
       ``(B) if the case is converted to a case under chapter 7, 
     as ordered by the court.
       ``(2) As soon as practicable after a final distribution 
     under paragraph (1), the office of the special trustee shall 
     terminate, except as may be necessary to wind up and conclude 
     the business and financial affairs of the trust.
       ``(d) After a transfer to the special trustee under this 
     section, the special trustee shall be subject only to 
     applicable nonbankruptcy law, and the actions and conduct of 
     the special trustee shall no longer be subject to approval by 
     the court in the case under this subchapter.

     ``Sec. 1187. Temporary and supplemental automatic stay; 
       assumed debt

       ``(a)(1) A petition filed under section 1183 operates as a 
     stay, applicable to all entities, of the termination, 
     acceleration, or modification of any debt, contract, lease, 
     or agreement of the kind described in paragraph (2), or of 
     any right or obligation under any such debt, contract, lease, 
     or agreement, solely because of--
       ``(A) a default by the debtor under any such debt, 
     contract, lease, or agreement; or
       ``(B) a provision in such debt, contract, lease, or 
     agreement, or in applicable nonbankruptcy law, that is 
     conditioned on--
       ``(i) the insolvency or financial condition of the debtor 
     at any time before the closing of the case;
       ``(ii) the commencement of a case under this title 
     concerning the debtor;
       ``(iii) the appointment of or taking possession by a 
     trustee in a case under this title concerning the debtor or 
     by a custodian before the commencement of the case; or
       ``(iv) a credit rating agency rating, or absence or 
     withdrawal of a credit rating agency rating--
       ``(I) of the debtor at any time after the commencement of 
     the case;
       ``(II) of an affiliate during the period from the 
     commencement of the case until 48 hours after such order is 
     entered;
       ``(III) of the bridge company while the trustee or the 
     special trustee is a direct or indirect beneficial holder of 
     more than 50 percent of the equity securities of--

       ``(aa) the bridge company; or
       ``(bb) the affiliate, if all of the direct or indirect 
     interests in the affiliate that are property of the estate 
     are transferred under section 1185; or

       ``(IV) of an affiliate while the trustee or the special 
     trustee is a direct or indirect beneficial holder of more 
     than 50 percent of the equity securities of--

       ``(aa) the bridge company; or
       ``(bb) the affiliate, if all of the direct or indirect 
     interests in the affiliate that are property of the estate 
     are transferred under section 1185.

       ``(2) A debt, contract, lease, or agreement described in 
     this paragraph is--
       ``(A) any debt (other than capital structure debt), 
     executory contract, or unexpired lease of the debtor (other 
     than a qualified financial contract);
       ``(B) any agreement under which the debtor issued or is 
     obligated for debt (other than capital structure debt);
       ``(C) any debt, executory contract, or unexpired lease of 
     an affiliate (other than a qualified financial contract); or
       ``(D) any agreement under which an affiliate issued or is 
     obligated for debt.
       ``(3) The stay under this subsection terminates--
       ``(A) for the benefit of the debtor, upon the earliest of--
       ``(i) 48 hours after the commencement of the case;
       ``(ii) assumption of the debt, contract, lease, or 
     agreement by the bridge company under an order authorizing a 
     transfer under section 1185;
       ``(iii) a final order of the court denying the request for 
     a transfer under section 1185; or
       ``(iv) the time the case is dismissed; and
       ``(B) for the benefit of an affiliate, upon the earliest 
     of--
       ``(i) the entry of an order authorizing a transfer under 
     section 1185 in which the direct or indirect interests in the 
     affiliate that are property of the estate are not transferred 
     under section 1185;
       ``(ii) a final order by the court denying the request for a 
     transfer under section 1185;
       ``(iii) 48 hours after the commencement of the case if the 
     court has not ordered a transfer under section 1185; or
       ``(iv) the time the case is dismissed.
       ``(4) Subsections (d), (e), (f), and (g) of section 362 
     apply to a stay under this subsection.
       ``(b) A debt, executory contract (other than a qualified 
     financial contract), or unexpired lease of the debtor, or an 
     agreement under which the debtor has issued or is obligated 
     for any debt, may be assumed by a bridge company in a 
     transfer under section 1185 notwithstanding any provision in 
     an agreement or in applicable nonbankruptcy law that--
       ``(1) prohibits, restricts, or conditions the assignment of 
     the debt, contract, lease, or agreement; or
       ``(2) accelerates, terminates, or modifies, or permits a 
     party other than the debtor to terminate or modify, the debt, 
     contract, lease, or agreement on account of--
       ``(A) the assignment of the debt, contract, lease, or 
     agreement; or
       ``(B) a change in control of any party to the debt, 
     contract, lease, or agreement.
       ``(c)(1) A debt, contract, lease, or agreement of the kind 
     described in subparagraph (A) or (B) of subsection (a)(2) may 
     not be accelerated, terminated, or modified, and any right or 
     obligation under such debt, contract, lease, or agreement may 
     not be accelerated, terminated, or modified, as to the bridge 
     company solely because of a provision in the debt, contract, 
     lease, or agreement or in applicable nonbankruptcy law--
       ``(A) of the kind described in subsection (a)(1)(B) as 
     applied to the debtor;
       ``(B) that prohibits, restricts, or conditions the 
     assignment of the debt, contract, lease, or agreement; or
       ``(C) that accelerates, terminates, or modifies, or permits 
     a party other than the debtor to terminate or modify, the 
     debt, contract, lease or agreement on account of--
       ``(i) the assignment of the debt, contract, lease, or 
     agreement; or
       ``(ii) a change in control of any party to the debt, 
     contract, lease, or agreement.
       ``(2) If there is a default by the debtor under a provision 
     other than the kind described in paragraph (1) in a debt, 
     contract, lease or agreement of the kind described in 
     subparagraph (A) or (B) of subsection (a)(2), the bridge 
     company may assume such debt, contract, lease, or agreement 
     only if the bridge company--
       ``(A) shall cure the default;
       ``(B) compensates, or provides adequate assurance in 
     connection with a transfer under section 1185 that the bridge 
     company will promptly compensate, a party other than the 
     debtor to the debt, contract, lease, or agreement, for any 
     actual pecuniary loss to the party resulting from the 
     default; and
       ``(C) provides adequate assurance in connection with a 
     transfer under section 1185 of future performance under the 
     debt, contract, lease, or agreement, as determined by the 
     court under section 1185(c)(4).

     ``Sec. 1188. Treatment of qualified financial contracts and 
       affiliate contracts

       ``(a) Notwithstanding sections 362(b)(6), 362(b)(7), 
     362(b)(17), 362(b)(27), 362(o), 555, 556, 559, 560, and 561, 
     a petition filed under section 1183 operates as a stay, 
     during the period specified in section 1187(a)(3)(A), 
     applicable to all entities, of the exercise of a contractual 
     right--
       ``(1) to cause the modification, liquidation, termination, 
     or acceleration of a qualified financial contract of the 
     debtor or an affiliate;
       ``(2) to offset or net out any termination value, payment 
     amount, or other transfer obligation arising under or in 
     connection with a qualified financial contract of the debtor 
     or an affiliate; or
       ``(3) under any security agreement or arrangement or other 
     credit enhancement forming a part of or related to a 
     qualified financial contract of the debtor or an affiliate.
       ``(b)(1) During the period specified in section 
     1187(a)(3)(A), the trustee or the affiliate shall perform all 
     payment and delivery obligations under such qualified 
     financial contract of the debtor or the affiliate, as the 
     case may be, that become due after the commencement of the 
     case. The stay provided under subsection (a) terminates as to 
     a qualified financial contract of the debtor or an affiliate 
     immediately upon the failure of the trustee or the affiliate, 
     as the case may be, to perform any such obligation during 
     such period.
       ``(2) Any failure by a counterparty to any qualified 
     financial contract of the debtor or any affiliate to perform 
     any payment or delivery obligation under such qualified 
     financial contract, including during the pendency of the stay 
     provided under subsection (a), shall constitute a breach of 
     such qualified financial contract by the counterparty.
       ``(c) Subject to the court's approval, a qualified 
     financial contract between an entity and the debtor may be 
     assigned to or assumed by the bridge company in a transfer 
     under, and in accordance with, section 1185 if and only if--
       ``(1) all qualified financial contracts between the entity 
     and the debtor are assigned to and assumed by the bridge 
     company in the transfer under section 1185;
       ``(2) all claims of the entity against the debtor in 
     respect of any qualified financial contract between the 
     entity and the debtor (other than any claim that, under the 
     terms of the qualified financial contract, is subordinated to 
     the claims of general unsecured creditors) are assigned to 
     and assumed by the bridge company;
       ``(3) all claims of the debtor against the entity under any 
     qualified financial contract between the entity and the 
     debtor are assigned to and assumed by the bridge company; and

[[Page 4054]]

       ``(4) all property securing or any other credit enhancement 
     furnished by the debtor for any qualified financial contract 
     described in paragraph (1) or any claim described in 
     paragraph (2) or (3) under any qualified financial contract 
     between the entity and the debtor is assigned to and assumed 
     by the bridge company.
       ``(d) Notwithstanding any provision of a qualified 
     financial contract or of applicable nonbankruptcy law, a 
     qualified financial contract of the debtor that is assumed or 
     assigned in a transfer under section 1185 may not be 
     accelerated, terminated, or modified, after the entry of the 
     order approving a transfer under section 1185, and any right 
     or obligation under the qualified financial contract may not 
     be accelerated, terminated, or modified, after the entry of 
     the order approving a transfer under section 1185 solely 
     because of a condition described in section 1187(c)(1), other 
     than a condition of the kind specified in section 1187(b) 
     that occurs after property of the estate no longer includes a 
     direct beneficial interest or an indirect beneficial interest 
     through the special trustee, in more than 50 percent of the 
     equity securities of the bridge company.
       ``(e) Notwithstanding any provision of any agreement or in 
     applicable nonbankruptcy law, an agreement of an affiliate 
     (including an executory contract, an unexpired lease, 
     qualified financial contract, or an agreement under which the 
     affiliate issued or is obligated for debt) and any right or 
     obligation under such agreement may not be accelerated, 
     terminated, or modified, solely because of a condition 
     described in section 1187(c)(1), other than a condition of 
     the kind specified in section 1187(b) that occurs after the 
     bridge company is no longer a direct or indirect beneficial 
     holder of more than 50 percent of the equity securities of 
     the affiliate, at any time after the commencement of the case 
     if--
       ``(1) all direct or indirect interests in the affiliate 
     that are property of the estate are transferred under section 
     1185 to the bridge company within the period specified in 
     subsection (a);
       ``(2) the bridge company assumes--
       ``(A) any guarantee or other credit enhancement issued by 
     the debtor relating to the agreement of the affiliate; and
       ``(B) any obligations in respect of rights of setoff, 
     netting arrangement, or debt of the debtor that directly 
     arises out of or directly relates to the guarantee or credit 
     enhancement; and
       ``(3) any property of the estate that directly serves as 
     collateral for the guarantee or credit enhancement is 
     transferred to the bridge company.

     ``Sec. 1189. Licenses, permits, and registrations

       ``(a) Notwithstanding any otherwise applicable 
     nonbankruptcy law, if a request is made under section 1185 
     for a transfer of property of the estate, any Federal, State, 
     or local license, permit, or registration that the debtor or 
     an affiliate had immediately before the commencement of the 
     case and that is proposed to be transferred under section 
     1185 may not be accelerated, terminated, or modified at any 
     time after the request solely on account of--
       ``(1) the insolvency or financial condition of the debtor 
     at any time before the closing of the case;
       ``(2) the commencement of a case under this title 
     concerning the debtor;
       ``(3) the appointment of or taking possession by a trustee 
     in a case under this title concerning the debtor or by a 
     custodian before the commencement of the case; or
       ``(4) a transfer under section 1185.
       ``(b) Notwithstanding any otherwise applicable 
     nonbankruptcy law, any Federal, State, or local license, 
     permit, or registration that the debtor had immediately 
     before the commencement of the case that is included in a 
     transfer under section 1185 shall be valid and all rights and 
     obligations thereunder shall vest in the bridge company.

     ``Sec. 1190. Exemption from securities laws

       ``For purposes of section 1145, a security of the bridge 
     company shall be deemed to be a security of a successor to 
     the debtor under a plan if the court approves the disclosure 
     statement for the plan as providing adequate information (as 
     defined in section 1125(a)) about the bridge company and the 
     security.

     ``Sec. 1191. Inapplicability of certain avoiding powers

       ``A transfer made or an obligation incurred by the debtor 
     to an affiliate prior to or after the commencement of the 
     case, including any obligation released by the debtor or the 
     estate to or for the benefit of an affiliate, in 
     contemplation of or in connection with a transfer under 
     section 1185 is not avoidable under section 544, 547, 
     548(a)(1)(B), or 549, or under any similar nonbankruptcy law.

     ``Sec. 1192. Consideration of financial stability

       ``The court may consider the effect that any decision in 
     connection with this subchapter may have on financial 
     stability in the United States.''.

     SEC. 4. AMENDMENTS TO TITLE 28, UNITED STATES CODE.

       (a) Amendment to Chapter 13.--Chapter 13 of title 28, 
     United States Code, is amended by adding at the end the 
     following:

     ``Sec. 298. Judge for a case under subchapter V of chapter 11 
       of title 11

       ``(a)(1) Notwithstanding section 295, the Chief Justice of 
     the United States shall designate not fewer than 10 
     bankruptcy judges to be available to hear a case under 
     subchapter V of chapter 11 of title 11. Bankruptcy judges may 
     request to be considered by the Chief Justice of the United 
     States for such designation.
       ``(2) Notwithstanding section 155, a case under subchapter 
     V of chapter 11 of title 11 shall be heard under section 157 
     by a bankruptcy judge designated under paragraph (1), who 
     shall be randomly assigned to hear such case by the chief 
     judge of the court of appeals for the circuit embracing the 
     district in which the case is pending. To the greatest extent 
     practicable, the approvals required under section 155 should 
     be obtained.
       ``(3) If the bankruptcy judge assigned to hear a case under 
     paragraph (2) is not assigned to the district in which the 
     case is pending, the bankruptcy judge shall be temporarily 
     assigned to the district.
       ``(b) A case under subchapter V of chapter 11 of title 11, 
     and all proceedings in the case, shall take place in the 
     district in which the case is pending.
       ``(c) In this section, the term `covered financial 
     corporation' has the meaning given that term in section 
     101(9A) of title 11.''.
       (b) Amendment to Section 1334 of Title 28.--Section 1334 of 
     title 28, United States Code, is amended by adding at the end 
     the following:
       ``(f) This section does not grant jurisdiction to the 
     district court after a transfer pursuant to an order under 
     section 1185 of title 11 of any proceeding related to a 
     special trustee appointed, or to a bridge company formed, in 
     connection with a case under subchapter V of chapter 11 of 
     title 11.''.
       (c) Technical and Conforming Amendment.--The table of 
     sections for chapter 13 of title 28, United States Code, is 
     amended by adding at the end the following:

``298. Judge for a case under subchapter V of chapter 11 of title 
              11.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Virginia (Mr. Goodlatte) and the gentleman from Georgia (Mr. Johnson) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Virginia.


                             General Leave

  Mr. GOODLATTE. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks and to include extraneous materials on H.R. 2947, currently 
under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Virginia?
  There was no objection.
  Mr. GOODLATTE. Mr. Speaker, I yield myself such time as I may 
consume.
  In 2008, our economy suffered one of the most significant financial 
crises in history. In the midst of the crisis and in response to a fear 
that some financial firms' failures could cause severe harm to the 
overall economy, the Federal Government provided extraordinary 
taxpayer-funded assistance in order to prevent certain financial firms' 
failures. In the ensuing years, experts from the financial, regulatory, 
legal, and academic communities examined how best to prevent another 
similar crisis from occurring and how to eliminate the possibility of 
using taxpayer moneys to bail out failing firms.
  The Judiciary Committee has advanced the review of this issue with 
the aim of crafting a solution that will better equip our bankruptcy 
laws to resolve failing firms while also encouraging greater private 
counterparty diligence in order to reduce the likelihood of another 
financial crisis. Among other things, this responded to provisions of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act, which 
called for an examination of how to improve the Bankruptcy Code in this 
area.
  Last Congress, after three hearings, the Judiciary Committee 
favorably reported the Financial Institution Bankruptcy Act, which is 
legislation that improved the Bankruptcy Code to better facilitate the 
resolution of a financial firm. That legislation was the culmination of 
a bipartisan process that solicited and incorporated the views of a 
wide range of leading experts and relevant regulators. The bill 
ultimately passed the House by a voice vote under a suspension of the 
rules.
  This Congress, Representative Trott reintroduced the Financial 
Institution Bankruptcy Act as H.R. 2947. Following its introduction, 
the Subcommittee on Regulatory Reform, Commercial and Antitrust Law 
conducted a hearing on the bill. The hearing witnesses all supported 
the legislation while providing recommendations for further refinements 
to the bill. Those recommendations were incorporated, and the Judiciary 
Committee approved the legislation by a unanimous vote of 25-0.

[[Page 4055]]

  The bill under consideration today is the product of a careful, 
deliberate, and thorough process, and it reflects a diverse range of 
views from a variety of interested parties. The Financial Institution 
Bankruptcy Act makes several improvements to the Bankruptcy Code in 
order to enhance the prospect of the efficient resolution of a 
financial firm through the bankruptcy process.
  The bill allows for the speedy transfer of a financial firm's 
operating assets over the course of a weekend. This quick transfer 
allows the financial firm to continue to operate in the normal course, 
which preserves the value of the enterprise for the creditors of the 
bankruptcy without there being any significant impact on the firm's 
employees, suppliers, and customers.
  The bill also requires expedited judicial review by a bankruptcy 
judge who has been randomly chosen from a pool of judges, who has been 
designated in advance, and who has been selected by the chief justice 
for his experience, expertise, and willingness to preside over these 
complex cases. Furthermore, the legislation provides for key regulatory 
input throughout the process.
  The Financial Institution Bankruptcy Act is a bipartisan, balanced 
approach that increases transparency and predictability in the 
resolution of a financial firm. Furthermore, it ensures that 
shareholders and creditors, not taxpayers, bear the losses related to 
the failure of a financial company.
  I am pleased that Ranking Member Conyers is a lead sponsor of this 
important legislation, and I thank him and his staff for their efforts 
in developing this bill. I thank Representative Trott for introducing 
this important legislation, and I thank Chairman Marino of the 
Subcommittee on Regulatory Reform, Commercial and Antitrust Law, who is 
one of the original sponsors of the bill and who helped to usher the 
bill through the Judiciary Committee. I also commend my colleague from 
Georgia, who is also involved in this work and who is the ranking 
member of that same subcommittee.
  I urge my colleagues to vote in favor of this important legislation.
  I reserve the balance of my time.
  Mr. JOHNSON of Georgia. Mr. Speaker, I yield myself such time as I 
may consume.
  H.R. 2947, the Financial Institution Bankruptcy Act of 2016, amends 
the Bankruptcy Code to establish a process for the expedited judicial 
resolution of large financial institutions in order to soften the 
disruptive effects of their collapse.
  As we all know, the Great Recession was triggered by the widespread 
issuance and limited regulation of high-risk and, possibly, fraudulent 
mortgage-backed securities. Fueled by adjustable rate and predatory 
subprime mortgages, these securities were issued without regard to 
careful underwriting standards, caused a housing bubble that trapped 
countless homeowners in unaffordable mortgages, and led to a massive 
wave of foreclosures that resulted in the worst financial crisis since 
the Great Depression. In the wake of this crisis, the President signed 
the Dodd-Frank Act into law so as to provide comprehensive measures to 
reduce systemic risk through heightened financial stability 
requirements for large financial institutions.
  Among many other requirements, title I of Dodd-Frank requires that 
certain large financial institutions have living wills to ensure a 
rapid and orderly resolution in the event of material distress or 
failure. Title II of the law provides for an administrative process to 
wind down these institutions so as to avoid adverse effects on the 
entire financial system; but there is no such process under the current 
bankruptcy law.
  I applaud Congressman Trott and the chairman of the full committee, 
Chairman Goodlatte, for addressing this concern by offering this 
legislation to revise the Bankruptcy Code in order to establish a 
specialized form of bankruptcy relief that would facilitate the 
expeditious resolution of large financial institutions and would 
minimize the disruptive impact of a company's collapse on the financial 
system. The legislation largely accomplishes this goal by establishing 
a resolution process that authorizes a court to provide relief by 
transferring a debtor's assets to a bridge company, under an expedited 
timeline, while minimizing the adverse effects of the bankruptcy on the 
financial system.
  While these aspects of the bill are commendable, I remain concerned, 
however, that this legislation lacks a funding mechanism that would 
allow the Federal Government to provide liquidity to the company, which 
is a key difference between an orderly resolution under Dodd-Frank and 
the resolution contemplated by H.R. 2947.
  In a typical bankruptcy case, the debtor's reorganization may be 
funded by private parties or by the Federal Government, as illustrated 
by the General Motors bankruptcy. In many instances, liquidity provided 
by the U.S. Government to prevent the collapse of a financial 
institution has either returned a profit to the taxpayers or is likely 
to be repaid.
  Leading bankruptcy experts have found that providing liquidity to 
distressed financial institutions ``is essential to successfully 
resolving the firm without creating undue systemic risk.'' This 
critical mechanism has prevented the collapses of several major 
financial institutions without cost to the taxpayer.
  Lastly, I would caution against efforts to combine H.R. 2947 with 
legislation that would strike title II of the Dodd-Frank Act. As the 
National Bankruptcy Conference has observed, laws that are currently in 
place, such as title II of the Dodd-Frank Act, should remain in effect 
because the ability of U.S. regulators to assume full control of the 
resolution process to elicit the cooperation from non-U.S. regulators 
is an essential insurance policy against systemic risk and potential 
conflict and dysfunction among the multinational components of these 
institutions. I would also note that title II of the Dodd-Frank Act 
will serve as a valuable backstop to the bankruptcy process should this 
bill become law.
  Notwithstanding these concerns, I thank, once again, the gentleman 
from Virginia, the gentleman from Michigan, and also my friend and 
chair of the relevant subcommittee, Tom Marino from Pennsylvania, for 
their leadership on this issue and for the bipartisan process in 
developing this legislation. I also thank the Democratic and Republican 
counsel of the Judiciary Committee, Susan Jensen and Anthony Grossi, 
for their tireless work and substantive expertise in developing this 
legislation.
  I reserve the balance of my time.
  Mr. GOODLATTE. Mr. Speaker, it is my pleasure to yield such time as 
he may consume to the gentleman from Michigan (Mr. Trott), the chief 
sponsor of the legislation.
  Mr. TROTT. I thank my colleagues Chairman Goodlatte, Ranking Member 
Conyers, and my friend from Georgia for their support of this important 
legislation. I also thank the other Members and the staff who have 
helped shape this bipartisan bill.
  Mr. Speaker, the American people are frustrated with their 
government. While families are working hard, are paying their taxes, 
and are doing their best to keep the American Dream alive, Washington 
decides to spend money it doesn't have on problems it shouldn't solve. 
Suffice it to say, both parties have proven to be bad stewards of our 
Nation's finances.
  Many of us were disappointed to see $700 billion in taxpayer money 
spent on bailing out failed financial institutions in 2008. The 
American people should not be on the hook for the failures of bad 
business practices. The American people entrusted us with their tax 
dollars, and Washington used the money to bail out banks. We cannot let 
this happen again. The legislation we are considering today is aimed at 
protecting American taxpayers and at reducing the risk of another 
taxpayer-funded bailout.
  The Financial Institution Bankruptcy Act protects taxpayers by 
reforming the process of how failing banks go through bankruptcy 
proceedings. We have incorporated the recommendations of hearing 
witnesses, regulators, and experts from four Judiciary Committee 
hearings over the

[[Page 4056]]

past 2 years. This effort is, truly, the product of bipartisan work and 
compromise.
  Under this bill, the process will be handled by an experienced 
judge--a judge who knows how to handle the complex reorganizations of 
financial institutions. It will also result in a transparent judicial 
process instead of there being a group of bank CEOs and regulators that 
meets in a back room in order to decide how to save a failing bank. It 
will ensure that shareholders and creditors are at risk when a 
financial institution fails, not the American taxpayer. Further, 
decades of case law and precedent will ensure a fair result.
  This bill is the kind of commonsense legislation that, I believe, 
offers important solutions, that protects the American people, and that 
is deserving of strong bipartisan support. I encourage all of my 
colleagues to support this effort. Let's pass this bill and move it to 
the Senate for consideration.

                              {time}  1700

  Mr. GOODLATTE. Mr. Speaker, I only have one speaker remaining, 
myself, to close. So I am prepared to do that once the gentleman from 
Georgia yields back.
  I reserve the balance of my time.
  Mr. JOHNSON of Georgia. Mr. Speaker, I ask that my colleagues pass 
this measure.
  I yield back the remainder of my time.
  Mr. GOODLATTE. Mr. Speaker, the Financial Institution Bankruptcy Act 
is a necessary reform to ensure that taxpayers will not be called on to 
rescue the next failing financial firm. The legislation relies on 
longstanding bankruptcy principles that will be applied in a 
predictable and transparent manner.
  The Financial Institution Bankruptcy Act is a bipartisan measure that 
enjoys broad support from outside experts. I urge my colleagues to vote 
in favor of this important reform. I thank my colleagues on the 
Judiciary Committee for their bipartisan effort to produce this 
legislation.
  I yield back the balance of my time.
  Mr. CONYERS. Mr. Speaker, I rise in support of H.R. 2947, the 
``Financial Institution Bankruptcy Act of 2016.'' for several reasons.
  To begin with, the bill addresses a real need--recognized by 
regulatory agencies, bankruptcy experts, and the private sector--that 
the bankruptcy law must be amended so that it can expeditiously restore 
trust in the financial marketplace as soon as possible after the 
collapse of a major financial institution.
  As many of you may recall, the failure of Lehman Brothers in 2008 
caused a worldwide freeze on the availability of credit, which not only 
affected Wall Street, but Main Street as well.
  Even after Lehman sought bankruptcy relief, the filing did not 
prevent the near collapse of our Nation's economy. The Lehman case 
revealed that current bankruptcy law is ill-equipped to deal with 
complex financial institutions in economic distress.
  H.R. 2947 addresses these shortcomings by establishing a specialized 
form of bankruptcy relief whereby the holding company of a large 
financial institution could expeditiously obtain such relief, while 
allowing its operating subsidiaries to function outside of bankruptcy.
  Through this mechanism, the debtor's principal assets, such as its 
secured property, financial contracts, and the stock of its 
subsidiaries, would be transferred to a temporary ``bridge company,'' 
that, in turn, would liquidate these assets for the benefit of 
creditors under the supervision of a trustee.
  This process should reduce the likelihood of disruption to the 
financial marketplace and avoid any worldwide freeze on the 
availability of credit.
  Another reason why I support this bill is that it appropriately 
recognizes the important role the Dodd-Frank Act has in the regulation 
of large financial institutions.
  Without doubt, the Great Recession was a direct result of the 
regulatory equivalent of the Wild West.
  In the absence of any meaningful regulation of the mortgage industry, 
lenders developed high risk subprime mortgages and used predatory 
marketing tactics targeting the most vulnerable.
  These doomed-to-fail mortgages were then securitized and sold to 
unsuspecting investors, including pension funds and school districts.
  Millions of Americans were trapped in mortgages they could no longer 
afford. This resulted in causing vast waves of foreclosures, massive 
unemployment, and international economic upheaval.
  The Dodd-Frank Act goes a long way toward reinvigorating a regulatory 
system that makes the financial marketplace more accountable, more 
transparent, and more resilient.
  And, H.R. 2947 will make the Dodd-Frank Act even more effective by 
ensuring the bankruptcy law is better equipped to resolve these 
companies.
  Finally, I am pleased that H.R. 2947 is the product of a very 
collaborative, inclusive, and deliberative process.
  A collaborative process--particularly with respect to complex 
legislation with wide-ranging consequences--is essential. It should be 
the norm, not the exception.
  Accordingly, I commend Judiciary Committee Chairman Goodlatte for his 
leadership in ensuring this collaborative process for H.R. 2947.
  Nevertheless, while the bill is an excellent measure, it 
unfortunately does not include any provision allowing the federal 
government to be a lender of last resort, a critical element that 
nearly every expert recognizes is necessary to ensure financial 
stability. This is a matter that at some point must be addressed.
  Again, I want to acknowledge the excellent level of cooperation on 
both sides of the aisle in producing the legislation that is pending 
before us today.
  In closing, I appreciate that my Judiciary Committee colleagues on 
both sides of the aisle have come together to support H.R. 2947.
  Nevertheless, I strongly encourage Chairman Goodlatte to consider 
other bankruptcy-related measures that my colleagues and I have 
introduced this Congress dealing with equally important matters.
  These measures include H.R. 97, the ``Protecting Employees and 
Retirees in Business Bankruptcies Act,'' which I introduced to help 
level the playing field for employees and pensioners in corporate 
bankruptcy cases.
  I also would urge consideration of legislation, such as H.R. 1674, 
the ``Private Student Loan Bankruptcy Fairness Act,'' a bill sponsored 
by my colleague, the gentleman from Tennessee Steve Cohen, that would 
help relieve those who--through no fault of their own--become entrapped 
in unaffordable, predatory student loan obligations.
  These measures also deserve to be considered prior to the close of 
this Congress.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Virginia (Mr. Goodlatte) that the House suspend the 
rules and pass the bill, H.R. 2947, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

                          ____________________