[112th Congress Public Law 88]
[From the U.S. Government Printing Office]



[[Page 125 STAT. 1899]]

Public Law 112-88
112th Congress

                                 An Act


 
   To instruct the Inspector General of the Federal Deposit Insurance 
   Corporation to study the impact of insured depository institution 
failures, and for other purposes. <<NOTE: Jan. 3, 2012 -  [H.R. 2056]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. INSPECTOR GENERAL STUDY.

    (a) Study.--The Inspector General of the Federal Deposit Insurance 
Corporation (FDIC) shall conduct a comprehensive study on the impact of 
the failure of insured depository institutions.
    (b) Definitions.--For purposes of this Act--
            (1) the term ``insured depository institution'' has the 
        meaning given such term in section 3(c) of the Federal Deposit 
        Insurance Act (12 U.S.C. 1813(c)); and
            (2) the term ``private equity company'' has the meaning 
        given the terms ``hedge fund'' and ``private equity fund'' in 
        section 13(h)(2) of the Bank Holding Company Act of 1956 (12 
        U.S.C. 1851(h)(2)).

    (c) Matters To Be Studied.--In conducting the study under this 
section, the Inspector General shall address the following:
            (1) Loss-sharing agreements.--The effect of loss-sharing 
        agreements (LSAs), including--
                    (A) the impact of loss-sharing on the insured 
                depository institutions that survive and the borrowers 
                of insured depository institutions that fail, 
                including--
                          (i) the impact on the rate of loan 
                      modifications and adjustments;
                          (ii) whether more types of loans (such as 
                      commercial (including land development and 1- to 
                      4-family residential and commercial construction 
                      loans), residential, or small business loans) 
                      could be modified with fewer LSAs, or if LSAs 
                      could be phased out altogether;
                          (iii) the FDIC's policies and procedures for 
                      monitoring LSAs, including those designed to 
                      ensure institutions are not imprudently selling 
                      assets at a depressed value;
                          (iv) the impact on the availability of credit; 
                      and
                          (v) the impact on loans with participation 
                      agreements outstanding with other insured 
                      depository institutions;
                    (B) the FDIC's policies and procedures for 
                terminating LSAs and mitigating the risk of acquiring 
                institutions having substantial assets remaining in 
                their portfolio when the LSAs are due to expire;

[[Page 125 STAT. 1900]]

                    (C) the extent to which LSAs provide incentives for 
                loan modifications and other means of increasing the 
                probability of commercial assets being considered 
                ``performing'';
                    (D) the nature and extent of differences for 
                modifying residential assets and working out commercial 
                real estate under LSAs; and
                    (E) methods of ensuring the orderly end of expiring 
                LSAs to prevent any adverse impact on borrowing, real 
                estate industry and the Depositors Insurance Fund.
            (2) Losses.--The significance of losses, including--
                    (A) the number of insured depository institutions 
                that have been placed into receivership or 
                conservatorship due to significant losses arising from 
                loans for which all payments of principal, interest, and 
                fees were current, according to the contractual terms of 
                the loans;
                    (B) the impact of significant losses arising from 
                loans for which all payments of principal, interest, and 
                fees were current, according to the contractual terms of 
                the loans, on the ability of insured depository 
                institutions to raise additional capital;
                    (C) the effect of changes in the application of fair 
                value accounting rules and other accounting standards, 
                including the allowance for loan and lease loss 
                methodology, on insured depository institutions, 
                specifically the degree to which fair value accounting 
                rules and other accounting standards have led to 
                regulatory action against banks, including consent 
                orders and closure of the institution; and
                    (D) whether field examiners are using appropriate 
                appraisal procedures with respect to losses arising from 
                loans for which all payments of principal, interest, and 
                fees were current, according to the contractual terms of 
                the loans, and whether the application of appraisals 
                leads to immediate write downs on the value of the 
                underlying asset.
            (3) Appraisals.--
                    (A) The number of insured depository institutions 
                placed into receivership or conservatorship due to asset 
                write-downs and the policies and procedures for 
                evaluating the adequacy of an insured depository 
                institution's allowance for loan and lease losses.
                    (B) The policies and procedures examiners use for 
                evaluating the appraised values of property securing 
                real estate loans and the extent to which those policies 
                and procedures are followed.
                    (C) FDIC field examiner implementation of guidance 
                issued December 2, 2010, titled ``Agencies Issue Final 
                Appraisal and Evaluation Guidelines''.
            (4) Capital.--
                    (A) The factors that examiners use to assess the 
                adequacy of capital at insured depository institutions, 
                including the extent to which the quality and risk 
                profile of the insured institution's loan portfolio is 
                considered in the examiners' assessment.
                    (B) The number of applications received by the FDIC 
                from private capital investors to acquire insured 
                depository institutions in receivership, the factors 
                used by the FDIC

[[Page 125 STAT. 1901]]

                in evaluating the applications, and the number of 
                applications that have been approved or not approved, 
                including the reasons pertaining thereto.
                    (C) The policies and procedures associated with the 
                evaluation of potential private investments in insured 
                depository institutions and the extent to which those 
                policies and procedures are followed.
            (5) Workouts.--The success of FDIC field examiners in 
        implementing FDIC guidelines titled ``Policy Statement on 
        Prudent Commercial Real Estate Loan Workouts'' (October 31, 
        2009) regarding workouts of commercial real estate, including--
                    (A) whether field examiners are using the correct 
                appraisals; and
                    (B) whether there is any difference in 
                implementation between residential workouts and 
                commercial (including land development and 1- to 4-
                family residential and commercial construction loans) 
                workouts.
            (6) Orders.--The application and impact of consent orders 
        and cease and desist orders, including--
                    (A) whether such orders have been applied uniformly 
                and fairly across all insured depository institutions;
                    (B) the reasons for failing to apply such orders 
                uniformly and fairly when such failure occurs;
                    (C) the impact of such orders on the ability of 
                insured depository institutions to raise capital;
                    (D) the impact of such orders on the ability of 
                insured depository institutions to extend or modify 
                credit to existing and new borrowers; and
                    (E) whether individual insured depository 
                institutions have improved enough to have such orders 
                removed.
            (7) FDIC policy.--The application and impact of FDIC 
        policies, including--
                    (A) the impact of FDIC policies on the investment in 
                insured depository institutions, especially in States 
                where more than 10 such institutions have failed since 
                2008;
                    (B) whether the FDIC fairly and consistently applies 
                capital standards when an insured depository institution 
                is successful in raising private capital; and
                    (C) whether the FDIC steers potential investors away 
                from insured depository institutions that may be in 
                danger of being placed in receivership or 
                conservatorship.
            (8) Private equity companies.--The FDIC's handling of 
        potential investment from private equity companies in insured 
        depository institutions, including--
                    (A) the number of insured depository institutions 
                that have been approved to receive private equity 
                investment by the FDIC;
                    (B) the number of insured depository institutions 
                that have been rejected from receiving private equity 
                investment by the FDIC; and
                    (C) the reasons for rejection of private equity 
                investment when such rejection occurs.

    (d) Report.--Not later than 1 year after the date of the enactment 
of this Act, the Inspector General shall submit to Congress a report--

[[Page 125 STAT. 1902]]

            (1) on the results of the study conducted pursuant to this 
        section; and
            (2) any recommendations based on such study.

    (e) Coordination Between FDIC IG, Treasury IG, and Federal Reserve 
IG.-- <<NOTE: Consultation.>> In carrying out this section, the 
Inspector General of the FDIC shall consult with the Inspectors General 
of the Treasury and of the Federal Reserve System, and such Inspectors 
General shall provide any documents or other material requested by the 
Inspector General of the FDIC in order to carry out this section.
SEC. 2. CONGRESSIONAL TESTIMONY.

     <<NOTE: Deadline.>> The Inspector General of the Federal Deposit 
Insurance Corporation and the Comptroller General of the United States 
shall appear before the Committee on Banking, Housing, and Urban Affairs 
of the Senate and the Committee on Financial Services of the House of 
Representatives, not later than 150 days after the date of publication 
of the study required under this Act to discuss the outcomes and impact 
of Federal regulations on bank examinations and failures.
SEC. 3. GAO STUDY.

    (a) Study.--The Comptroller General of the United States shall carry 
out a study on the following:
            (1) The causes of high levels of bank failures in States 
        with 10 or more failures since 2008.
            (2) The procyclical impact of fair value accounting 
        standards.
            (3) The causes and potential solutions for the ``vicious 
        cycle'' of loan write downs, raising capital, and failures.
            (4) An analysis of the community impact of bank failures.
            (5) The feasibility and overall impact of loss share 
        agreements.

    (b) Report.--Not later than the end of the 1-year period beginning 
on the date of the enactment of this Act, the Comptroller General shall 
issue a report to the Congress on the study carried out pursuant to 
subsection (a).

    Approved January 3, 2012.

LEGISLATIVE HISTORY--H.R. 2056:
---------------------------------------------------------------------------

HOUSE REPORTS: No. 112-182 (Comm. on Financial Services).
CONGRESSIONAL RECORD, Vol. 157 (2011):
            July 26, 28, considered and passed House.
            Nov. 17, considered and passed Senate, amended.
            Dec. 19, 20, House considered and concurred in Senate 
                amendments.

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