[House Report 114-338]
[From the U.S. Government Publishing Office]


114th Congress    }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                    {       114-338

======================================================================



 
                  POLICYHOLDER PROTECTION ACT OF 2015

                                _______
                                

 November 16, 2015.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1478]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1478) to provide for notice to, and input by, 
State insurance commissioners when requiring an insurance 
company to serve as a source of financial strength or when the 
Federal Deposit Insurance Corporation places a lien against an 
insurance company's assets, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Policyholder Protection Act of 2015''.

SEC. 2. ENSURING THE PROTECTION OF INSURANCE POLICYHOLDERS.

  (a) Source of Strength.--Section 38A of the Federal Deposit Insurance 
Act (12 U.S.C. 1831o-1) is amended--
          (1) by redesignating subsections (c), (d), and (e) as 
        subsections (d), (e), and (f), respectively; and
          (2) by inserting after subsection (b) the following:
  ``(c) Authority of State Insurance Regulator.--
          ``(1) In general.--The provisions of section 5(g) of the Bank 
        Holding Company Act of 1956 (12 U.S.C. 1844(g)) shall apply to 
        a savings and loan holding company that is an insurance 
        company, an affiliate of an insured depository institution that 
        is an insurance company, and to any other company that is an 
        insurance company and that directly or indirectly controls an 
        insured depository institution, to the same extent as the 
        provisions of that section apply to a bank holding company that 
        is an insurance company.
          ``(2) Rule of construction.--Requiring a bank holding company 
        that is an insurance company, a savings and loan holding 
        company that is an insurance company, an affiliate of an 
        insured depository institution that is an insurance company, or 
        any other company that is an insurance company and that 
        directly or indirectly controls an insured depository 
        institution to serve as a source of financial strength under 
        this section shall be deemed an action of the Board that 
        requires a bank holding company to provide funds or other 
        assets to a subsidiary depository institution for purposes of 
        section 5(g) of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1844(g)).''.
  (b) Liquidation Authority.--The Dodd-Frank Wall Street Reform and 
Consumer Protection Act (12 U.S.C. 5301 et seq.) is amended--
          (1) in section 203(e)(3) (12 U.S.C. 5383(e)(3)), by inserting 
        ``or rehabilitation'' after ``orderly liquidation'' each place 
        that term appears; and
          (2) in section 204(d)(4) (12 U.S.C. 5384(d)(4)), by inserting 
        before the semicolon at the end the following: ``, except that, 
        if the covered financial company or covered subsidiary is an 
        insurance company or a subsidiary of an insurance company, the 
        Corporation--
                  ``(A) shall promptly notify the State insurance 
                authority for the insurance company of the intention to 
                take such lien; and
                  ``(B) may only take such lien--
                          ``(i) to secure repayment of funds made 
                        available to such covered financial company or 
                        covered subsidiary; and
                          ``(ii) if the Corporation determines, after 
                        consultation with the State insurance 
                        authority, that such lien will not unduly 
                        impede or delay the liquidation or 
                        rehabilitation of the insurance company, or the 
                        recovery by its policyholders''.

                          Purpose and Summary

    Introduced by Representative Posey, H.R. 1478, the 
``Policyholder Protection Act of 2015,'' clarifies that state 
insurance regulatory tools designed to protect policyholders 
will be available regardless of insurance company structure or 
financial circumstance. Accordingly, with respect to an 
insurance company that is organized as a savings and loan 
holding company, the bill provides that federal banking 
regulators are prohibited from moving the insurer's assets to 
an affiliated bank if the state insurance regulator determines 
that the transfer would harm the insurer. H.R. 1478 
additionally requires a consultation between the Federal 
Deposit Insurance Corporation (FDIC) and the state insurance 
authority regarding whether a lien or seizure would unduly 
impede or delay the liquidation or rehabilitation of an 
insurance company. Finally, H.R. 1478 clarifies the FDIC's 
``back up'' authority to liquidate or rehabilitate an insurance 
company as permitted by Title II of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act. The bill also preserves 
state regulators' discretion to choose liquidation or 
rehabilitation as a means to resolve distressed insurance 
firms.

                  Background and Need for Legislation

    Under the Bank Holding Company Act, when an insurer is 
organized within a bank holding company structure, state 
insurance regulators possess the authority to protect insurance 
company policyholders by preventing the transfer of an 
insurer's funds and other assets to a troubled banking 
subsidiary. H.R. 1478 clarifies the application of such 
protections to insurance companies organized within a Savings 
and Loan Holding Company (SLHC) structure.
    Section 616(d) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act amended federal banking law to codify 
what is commonly known as the ``Source of Strength'' doctrine. 
This provision mandates that federal banking regulators treat 
any holding company and its assets as ``a source of financial 
strength for any subsidiary that is . . . a depository 
institution'' in the event of the financial distress of the 
depository.
    Many have expressed concern that the Dodd-Frank Act's 
Source of Strength provision could place some insurance 
policyholders at risk when an affiliated insured depository 
institution fails. While insurance companies organized as Bank 
Holding Companies are protected by the Bank Holding Company Act 
from such transfers, many insurance companies with bank 
affiliates are organized as SLHCs and are not similarly 
protected.
    In addition, Sections 203(3)(3) and 204(d)(4) of the Dodd-
Frank Act, which are part of the Act's ``orderly liquidation 
authority,'' permit the FDIC to place a lien on the assets of 
businesses that are affiliated with a company that is subject 
to FDIC liquidation. However, there is concern that this 
authority allows the bank regulator to seize the insurance 
company's assets that are intended to protect insurance 
policyholders.
    To address these matters, H.R. 1478 extends the 
policyholder protections of the Bank Holding Company Act to 
bank-affiliated insurance companies organized as SLHCs. H.R. 
1478, as modified by an amendment reported by the Financial 
Services Committee, also requires a consultation between the 
FDIC and the appropriate state insurance authority regarding 
whether a lien or seizure would unduly impede or delay the 
liquidation or rehabilitation of an insurance company. In so 
doing, H.R. 1478 codifies an FDIC regulatory requirement that 
such consultations occur between the agency and the state 
authority.
    Finally, H.R. 1478 clarifies the FDIC's ``back up'' 
authority to liquidate or rehabilitate an insurance company as 
permitted by Title II of the Dodd-Frank Act. The bill also 
preserves state regulators' discretion to choose liquidation or 
rehabilitation as a means to resolve distressed insurance 
firms.

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Housing and Insurance held a hearing examining matters relating 
to H.R. 1478 on September 29, 2015.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 3, 2015 and November 4, 2015, and ordered H.R. 1478 to 
be reported favorably to the House with an amendment by a 
recorded vote of 57 yeas to 0 nays (recorded vote no. FC-67), a 
quorum being present. Before the motion to report was offered, 
the Committee adopted an amendment in the nature of a 
substitute offered by Mr. Posey by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House with an amendment. The 
motion was agreed to by a recorded vote of 57 yeas to 0 nays 
(Record vote no. FC-67), a quorum being present.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 1478 
will protect insurance policyholders by providing for the 
safeguarding of insurance company assets in the event the 
insurer's bank affiliates experience distress, and by providing 
for certain reforms to the ``orderly liquidation authority'' 
established under Title II of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 16, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1478, the 
Policyholder Protection Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 1478--Policyholder Protection Act of 2015

    H.R. 1478 would amend existing laws regarding the financial 
regulation of insurance companies. Under the bill, federal 
banking regulators would be required to meet certain 
substantive and procedural requirements before requiring 
certain insurance companies to provide financial support to a 
depository institution. The bill also would revise certain 
procedures governing the orderly liquidation by the Federal 
Deposit Insurance Corporation (FDIC) of a systemically 
important financial firm that is an insurance company or a 
subsidiary of an insurance company.
    CBO estimates that enacting H.R. 1478 could affect net 
direct spending if the FDIC needed to resolve failed financial 
institutions affiliated with insurance companies; however, any 
such costs probably would be insignificant over the 2016-2025 
period. Because H.R. 1478 would affect direct spending, pay-as-
you-go procedures apply. Enacting the bill would not affect 
revenues. CBO estimates that enacting H.R. 1478 would not 
increase net direct spending or on-budget deficits by more than 
$5 billion in any of the four consecutive 10-year periods 
beginning in 2026.
    Based on information from the FDIC, CBO estimates that the 
insurance companies affected by this bill account for less than 
1 percent of the domestic deposits of insured institutions. 
Although the FDIC currently has the legal authority to use the 
financial resources of those insurance companies if their 
insured depository institution failed, CBO expects that the 
agency would be unlikely to use that authority in a manner that 
would have a materially adverse effect on the company's 
insurance activities. Thus, CBO estimates that the expected 
value of any change in resolution costs to the federal 
government as a result of this bill would be small and would be 
offset in subsequent years by additional income from deposit 
insurance premiums.
    Finally, CBO estimates that provisions related to resolving 
potential failures of systemically important institutions would 
have no significant budgetary effects over the 2016-2025 
period. CBO expects that the FDIC would use the alternative 
resolution methods authorized by the bill only if doing so 
would reduce costs and that the bill's limit on imposing liens 
on insurance resources would be implemented in a manner similar 
to existing regulatory policies.
    H.R. 1478 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    On July 29, 2015, CBO transmitted a cost estimate for S. 
1484, the Financial Regulatory Improvement Act of 2015, as 
ordered reported by the Senate Committee on Banking, Housing 
and Urban Affairs on June 2, 2015. Title IV of S. 1484 
contained provisions similar to those in H.R. 1478 and CBO's 
estimates of the budgetary effects of those provisions are the 
same.
    The CBO staff contact for this estimate is Kathleen Gramp. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 1478 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 1478 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(k) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 1478 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This Section cites H.R. 1478 as the ``Policyholder 
Protection Act of 2015''

Section 2. Ensuring the protection of insurance policyholders

    This section extends ``Source of Strength'' protections 
applicable under the Bank Holding Company Act to a savings and 
loan holding company that is an insurance company, to an 
affiliate of an insured deposit institution that is an 
insurance company, and to any other company that is an 
insurance company and that directly or indirectly controls an 
insured depository institution. This section additionally 
requires that the FDIC consult with the appropriate State 
insurance authority before taking a lien with respect to an 
insurance company. Finally, this section preserves state 
regulators' discretion to choose liquidation or rehabilitation 
as a means to resolve distressed insurance firms.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                     FEDERAL DEPOSIT INSURANCE ACT




           *       *       *       *       *       *       *
SEC. 38A. SOURCE OF STRENGTH.

  (a) Holding Companies.--The appropriate Federal banking 
agency for a bank holding company or savings and loan holding 
company shall require the bank holding company or savings and 
loan holding company to serve as a source of financial strength 
for any subsidiary of the bank holding company or savings and 
loan holding company that is a depository institution.
  (b) Other Companies.--If an insured depository institution is 
not the subsidiary of a bank holding company or savings and 
loan holding company, the appropriate Federal banking agency 
for the insured depository institution shall require any 
company that directly or indirectly controls the insured 
depository institution to serve as a source of financial 
strength for such institution.
  (c) Authority of State Insurance Regulator.--
          (1) In general.--The provisions of section 5(g) of 
        the Bank Holding Company Act of 1956 (12 U.S.C. 
        1844(g)) shall apply to a savings and loan holding 
        company that is an insurance company, an affiliate of 
        an insured depository institution that is an insurance 
        company, and to any other company that is an insurance 
        company and that directly or indirectly controls an 
        insured depository institution, to the same extent as 
        the provisions of that section apply to a bank holding 
        company that is an insurance company.
          (2) Rule of construction.--Requiring a bank holding 
        company that is an insurance company, a savings and 
        loan holding company that is an insurance company, an 
        affiliate of an insured depository institution that is 
        an insurance company, or any other company that is an 
        insurance company and that directly or indirectly 
        controls an insured depository institution to serve as 
        a source of financial strength under this section shall 
        be deemed an action of the Board that requires a bank 
        holding company to provide funds or other assets to a 
        subsidiary depository institution for purposes of 
        section 5(g) of the Bank Holding Company Act of 1956 
        (12 U.S.C. 1844(g)).
  [(c)] (d) Reports.--The appropriate Federal banking agency 
for an insured depository institution described in subsection 
(b) may, from time to time, require the company, or a company 
that directly or indirectly controls the insured depository 
institution, to submit a report, under oath, for the purposes 
of--
          (1) assessing the ability of such company to comply 
        with the requirement under subsection (b); and
          (2) enforcing the compliance of such company with the 
        requirement under subsection (b).
  [(d)] (e) Rules.--Not later than 1 year after the transfer 
date, as defined in section 311 of the Enhancing Financial 
Institution Safety and Soundness Act of 2010, the appropriate 
Federal banking agencies shall jointly issue final rules to 
carry out this section.
  [(e)] (f) Definition.--In this section, the term ``source of 
financial strength'' means the ability of a company that 
directly or indirectly owns or controls an insured depository 
institution to provide financial assistance to such insured 
depository institution in the event of the financial distress 
of the insured depository institution.

           *       *       *       *       *       *       *

                              ----------                              


       DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT



           *       *       *       *       *       *       *
TITLE II--ORDERLY LIQUIDATION AUTHORITY

           *       *       *       *       *       *       *


SEC. 203. SYSTEMIC RISK DETERMINATION.

  (a) Written Recommendation and Determination.--
          (1) Vote required.--
                  (A) In general.--On their own initiative, or 
                at the request of the Secretary, the 
                Corporation and the Board of Governors shall 
                consider whether to make a written 
                recommendation described in paragraph (2) with 
                respect to whether the Secretary should appoint 
                the Corporation as receiver for a financial 
                company. Such recommendation shall be made upon 
                a vote of not fewer than \2/3\ of the members 
                of the Board of Governors then serving and \2/
                3\ of the members of the board of directors of 
                the Corporation then serving.
                  (B) Cases involving brokers or dealers.--In 
                the case of a broker or dealer, or in which the 
                largest United States subsidiary (as measured 
                by total assets as of the end of the previous 
                calendar quarter) of a financial company is a 
                broker or dealer, the Commission and the Board 
                of Governors, at the request of the Secretary, 
                or on their own initiative, shall consider 
                whether to make the written recommendation 
                described in paragraph (2) with respect to the 
                financial company. Subject to the requirements 
                in paragraph (2), such recommendation shall be 
                made upon a vote of not fewer than \2/3\ of the 
                members of the Board of Governors then serving 
                and \2/3\ of the members of the Commission then 
                serving, and in consultation with the 
                Corporation.
                  (C) Cases involving insurance companies.--In 
                the case of an insurance company, or in which 
                the largest United States subsidiary (as 
                measured by total assets as of the end of the 
                previous calendar quarter) of a financial 
                company is an insurance company, the Director 
                of the Federal Insurance Office and the Board 
                of Governors, at the request of the Secretary 
                or on their own initiative, shall consider 
                whether to make the written recommendation 
                described in paragraph (2) with respect to the 
                financial company. Subject to the requirements 
                in paragraph (2), such recommendation shall be 
                made upon a vote of not fewer than \2/3\ of the 
                Board of Governors then serving and the 
                affirmative approval of the Director of the 
                Federal Insurance Office, and in consultation 
                with the Corporation.
          (2) Recommendation required.--Any written 
        recommendation pursuant to paragraph (1) shall 
        contain--
                  (A) an evaluation of whether the financial 
                company is in default or in danger of default;
                  (B) a description of the effect that the 
                default of the financial company would have on 
                financial stability in the United States;
                  (C) a description of the effect that the 
                default of the financial company would have on 
                economic conditions or financial stability for 
                low income, minority, or underserved 
                communities;
                  (D) a recommendation regarding the nature and 
                the extent of actions to be taken under this 
                title regarding the financial company;
                  (E) an evaluation of the likelihood of a 
                private sector alternative to prevent the 
                default of the financial company;
                  (F) an evaluation of why a case under the 
                Bankruptcy Code is not appropriate for the 
                financial company;
                  (G) an evaluation of the effects on 
                creditors, counterparties, and shareholders of 
                the financial company and other market 
                participants; and
                  (H) an evaluation of whether the company 
                satisfies the definition of a financial company 
                under section 201.
  (b) Determination by the Secretary.--Notwithstanding any 
other provision of Federal or State law, the Secretary shall 
take action in accordance with section 202(a)(1)(A), if, upon 
the written recommendation under subsection (a), the Secretary 
(in consultation with the President) determines that--
          (1) the financial company is in default or in danger 
        of default;
          (2) the failure of the financial company and its 
        resolution under otherwise applicable Federal or State 
        law would have serious adverse effects on financial 
        stability in the United States;
          (3) no viable private sector alternative is available 
        to prevent the default of the financial company;
          (4) any effect on the claims or interests of 
        creditors, counterparties, and shareholders of the 
        financial company and other market participants as a 
        result of actions to be taken under this title is 
        appropriate, given the impact that any action taken 
        under this title would have on financial stability in 
        the United States;
          (5) any action under section 204 would avoid or 
        mitigate such adverse effects, taking into 
        consideration the effectiveness of the action in 
        mitigating potential adverse effects on the financial 
        system, the cost to the general fund of the Treasury, 
        and the potential to increase excessive risk taking on 
        the part of creditors, counterparties, and shareholders 
        in the financial company;
          (6) a Federal regulatory agency has ordered the 
        financial company to convert all of its convertible 
        debt instruments that are subject to the regulatory 
        order; and
          (7) the company satisfies the definition of a 
        financial company under section 201.
  (c) Documentation and Review.--
          (1) In general.--The Secretary shall--
                  (A) document any determination under 
                subsection (b);
                  (B) retain the documentation for review under 
                paragraph (2); and
                  (C) notify the covered financial company and 
                the Corporation of such determination.
          (2) Report to congress.--Not later than 24 hours 
        after the date of appointment of the Corporation as 
        receiver for a covered financial company, the Secretary 
        shall provide written notice of the recommendations and 
        determinations reached in accordance with subsections 
        (a) and (b) to the Majority Leader and the Minority 
        Leader of the Senate and the Speaker and the Minority 
        Leader of the House of Representatives, the Committee 
        on Banking, Housing, and Urban Affairs of the Senate, 
        and the Committee on Financial Services of the House of 
        Representatives, which shall consist of a summary of 
        the basis for the determination, including, to the 
        extent available at the time of the determination--
                  (A) the size and financial condition of the 
                covered financial company;
                  (B) the sources of capital and credit support 
                that were available to the covered financial 
                company;
                  (C) the operations of the covered financial 
                company that could have had a significant 
                impact on financial stability, markets, or 
                both;
                  (D) identification of the banks and financial 
                companies which may be able to provide the 
                services offered by the covered financial 
                company;
                  (E) any potential international ramifications 
                of resolution of the covered financial company 
                under other applicable insolvency law;
                  (F) an estimate of the potential effect of 
                the resolution of the covered financial company 
                under other applicable insolvency law on the 
                financial stability of the United States;
                  (G) the potential effect of the appointment 
                of a receiver by the Secretary on consumers;
                  (H) the potential effect of the appointment 
                of a receiver by the Secretary on the financial 
                system, financial markets, and banks and other 
                financial companies; and
                  (I) whether resolution of the covered 
                financial company under other applicable 
                insolvency law would cause banks or other 
                financial companies to experience severe 
                liquidity distress.
          (3) Reports to congress and the public.--
                  (A) In general.--Not later than 60 days after 
                the date of appointment of the Corporation as 
                receiver for a covered financial company, the 
                Corporation shall file a report with the 
                Committee on Banking, Housing, and Urban 
                Affairs of the Senate and the Committee on 
                Financial Services of the House of 
                Representatives--
                          (i) setting forth information on the 
                        financial condition of the covered 
                        financial company as of the date of the 
                        appointment, including a description of 
                        its assets and liabilities;
                          (ii) describing the plan of, and 
                        actions taken by, the Corporation to 
                        wind down the covered financial 
                        company;
                          (iii) explaining each instance in 
                        which the Corporation waived any 
                        applicable requirements of part 366 of 
                        title 12, Code of Federal Regulations 
                        (or any successor thereto) with respect 
                        to conflicts of interest by any person 
                        in the private sector who was retained 
                        to provide services to the Corporation 
                        in connection with such receivership;
                          (iv) describing the reasons for the 
                        provision of any funding to the 
                        receivership out of the Fund;
                          (v) setting forth the expected costs 
                        of the orderly liquidation of the 
                        covered financial company;
                          (vi) setting forth the identity of 
                        any claimant that is treated in a 
                        manner different from other similarly 
                        situated claimants under subsection 
                        (b)(4), (d)(4), or (h)(5)(E), the 
                        amount of any additional payment to 
                        such claimant under subsection (d)(4), 
                        and the reason for any such action; and
                          (vii) which report the Corporation 
                        shall publish on an online website 
                        maintained by the Corporation, subject 
                        to maintaining appropriate 
                        confidentiality.
                  (B) Amendments.--The Corporation shall, on a 
                timely basis, not less frequently than 
                quarterly, amend or revise and resubmit the 
                reports prepared under this paragraph, as 
                necessary.
                  (C) Congressional testimony.--The Corporation 
                and the primary financial regulatory agency, if 
                any, of the financial company for which the 
                Corporation was appointed receiver under this 
                title shall appear before Congress, if 
                requested, not later than 30 days after the 
                date on which the Corporation first files the 
                reports required under subparagraph (A).
          (4) Default or in danger of default.--For purposes of 
        this title, a financial company shall be considered to 
        be in default or in danger of default if, as determined 
        in accordance with subsection (b)--
                  (A) a case has been, or likely will promptly 
                be, commenced with respect to the financial 
                company under the Bankruptcy Code;
                  (B) the financial company has incurred, or is 
                likely to incur, losses that will deplete all 
                or substantially all of its capital, and there 
                is no reasonable prospect for the company to 
                avoid such depletion;
                  (C) the assets of the financial company are, 
                or are likely to be, less than its obligations 
                to creditors and others; or
                  (D) the financial company is, or is likely to 
                be, unable to pay its obligations (other than 
                those subject to a bona fide dispute) in the 
                normal course of business.
          (5) GAO review.--The Comptroller General of the 
        United States shall review and report to Congress on 
        any determination under subsection (b), that results in 
        the appointment of the Corporation as receiver, 
        including--
                  (A) the basis for the determination;
                  (B) the purpose for which any action was 
                taken pursuant thereto;
                  (C) the likely effect of the determination 
                and such action on the incentives and conduct 
                of financial companies and their creditors, 
                counterparties, and shareholders; and
                  (D) the likely disruptive effect of the 
                determination and such action on the reasonable 
                expectations of creditors, counterparties, and 
                shareholders, taking into account the impact 
                any action under this title would have on 
                financial stability in the United States, 
                including whether the rights of such parties 
                will be disrupted.
  (d) Corporation Policies and Procedures.--As soon as is 
practicable after the date of enactment of this Act, the 
Corporation shall establish policies and procedures that are 
acceptable to the Secretary governing the use of funds 
available to the Corporation to carry out this title, including 
the terms and conditions for the provision and use of funds 
under sections 204(d), 210(h)(2)(G)(iv), and 210(h)(9).
  (e) Treatment of Insurance Companies and Insurance Company 
Subsidiaries.--
          (1) In general.--Notwithstanding subsection (b), if 
        an insurance company is a covered financial company or 
        a subsidiary or affiliate of a covered financial 
        company, the liquidation or rehabilitation of such 
        insurance company, and any subsidiary or affiliate of 
        such company that is not excepted under paragraph (2), 
        shall be conducted as provided under applicable State 
        law.
          (2) Exception for subsidiaries and affiliates.--The 
        requirement of paragraph (1) shall not apply with 
        respect to any subsidiary or affiliate of an insurance 
        company that is not itself an insurance company.
          (3) Backup authority.--Notwithstanding paragraph (1), 
        with respect to a covered financial company described 
        in paragraph (1), if, after the end of the 60-day 
        period beginning on the date on which a determination 
        is made under section 202(a) with respect to such 
        company, the appropriate regulatory agency has not 
        filed the appropriate judicial action in the 
        appropriate State court to place such company into 
        orderly liquidation or rehabilitation under the laws 
        and requirements of the State, the Corporation shall 
        have the authority to stand in the place of the 
        appropriate regulatory agency and file the appropriate 
        judicial action in the appropriate State court to place 
        such company into orderly liquidation or rehabilitation 
        under the laws and requirements of the State.

SEC. 204. ORDERLY LIQUIDATION OF COVERED FINANCIAL COMPANIES.

  (a) Purpose of Orderly Liquidation Authority.--It is the 
purpose of this title to provide the necessary authority to 
liquidate failing financial companies that pose a significant 
risk to the financial stability of the United States in a 
manner that mitigates such risk and minimizes moral hazard. The 
authority provided in this title shall be exercised in the 
manner that best fulfills such purpose, so that--
          (1) creditors and shareholders will bear the losses 
        of the financial company;
          (2) management responsible for the condition of the 
        financial company will not be retained; and
          (3) the Corporation and other appropriate agencies 
        will take all steps necessary and appropriate to assure 
        that all parties, including management, directors, and 
        third parties, having responsibility for the condition 
        of the financial company bear losses consistent with 
        their responsibility, including actions for damages, 
        restitution, and recoupment of compensation and other 
        gains not compatible with such responsibility.
  (b) Corporation as Receiver.--Upon the appointment of the 
Corporation under section 202, the Corporation shall act as the 
receiver for the covered financial company, with all of the 
rights and obligations set forth in this title.
  (c) Consultation.--The Corporation, as receiver--
          (1) shall consult with the primary financial 
        regulatory agency or agencies of the covered financial 
        company and its covered subsidiaries for purposes of 
        ensuring an orderly liquidation of the covered 
        financial company;
          (2) may consult with, or under subsection 
        (a)(1)(B)(v) or (a)(1)(L) of section 210, acquire the 
        services of, any outside experts, as appropriate to 
        inform and aid the Corporation in the orderly 
        liquidation process;
          (3) shall consult with the primary financial 
        regulatory agency or agencies of any subsidiaries of 
        the covered financial company that are not covered 
        subsidiaries, and coordinate with such regulators 
        regarding the treatment of such solvent subsidiaries 
        and the separate resolution of any such insolvent 
        subsidiaries under other governmental authority, as 
        appropriate; and
          (4) shall consult with the Commission and the 
        Securities Investor Protection Corporation in the case 
        of any covered financial company for which the 
        Corporation has been appointed as receiver that is a 
        broker or dealer registered with the Commission under 
        section 15(b) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78o(b)) and is a member of the Securities 
        Investor Protection Corporation, for the purpose of 
        determining whether to transfer to a bridge financial 
        company organized by the Corporation as receiver, 
        without consent of any customer, customer accounts of 
        the covered financial company.
  (d) Funding for Orderly Liquidation.--Upon its appointment as 
receiver for a covered financial company, and thereafter as the 
Corporation may, in its discretion, determine to be necessary 
or appropriate, the Corporation may make available to the 
receivership, subject to the conditions set forth in section 
206 and subject to the plan described in section 210(n)(9), 
funds for the orderly liquidation of the covered financial 
company. All funds provided by the Corporation under this 
subsection shall have a priority of claims under subparagraph 
(A) or (B) of section 210(b)(1), as applicable, including funds 
used for--
          (1) making loans to, or purchasing any debt 
        obligation of, the covered financial company or any 
        covered subsidiary;
          (2) purchasing or guaranteeing against loss the 
        assets of the covered financial company or any covered 
        subsidiary, directly or through an entity established 
        by the Corporation for such purpose;
          (3) assuming or guaranteeing the obligations of the 
        covered financial company or any covered subsidiary to 
        1 or more third parties;
          (4) taking a lien on any or all assets of the covered 
        financial company or any covered subsidiary, including 
        a first priority lien on all unencumbered assets of the 
        covered financial company or any covered subsidiary to 
        secure repayment of any transactions conducted under 
        this subsection, except that, if the covered financial 
        company or covered subsidiary is an insurance company 
        or a subsidiary of an insurance company, the 
        Corporation--
                  (A) shall promptly notify the State insurance 
                authority for the insurance company of the 
                intention to take such lien; and
                  (B) may only take such lien--
                          (i) to secure repayment of funds made 
                        available to such covered financial 
                        company or covered subsidiary; and
                          (ii) if the Corporation determines, 
                        after consultation with the State 
                        insurance authority, that such lien 
                        will not unduly impede or delay the 
                        liquidation or rehabilitation of the 
                        insurance company, or the recovery by 
                        its policyholders;
          (5) selling or transferring all, or any part, of such 
        acquired assets, liabilities, or obligations of the 
        covered financial company or any covered subsidiary; 
        and
          (6) making payments pursuant to subsections (b)(4), 
        (d)(4), and (h)(5)(E) of section 210.

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