PUBLIC LAW 112–88—JAN. 3, 2012 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. 

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; 

Jan. 3, 2012 

[H.R. 2056] 


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125 STAT. 1900 PUBLIC LAW 112–88—JAN. 3, 2012 

(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 


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PUBLIC LAW 112–88—JAN. 3, 2012 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— 


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125 STAT. 1902 PUBLIC LAW 112–88—JAN. 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. 

Æ 

(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 FED- ERAL RESERVE IG.—In carrying out this section, the Inspector General of the FDIC shall consult with the Inspectors General of 

the Treasury and of the Federal Reserve System, and such Inspectors General shall provide any documents or other material 

requested by the Inspector General of the FDIC in order to carry 

out this section. 

SEC. 2. CONGRESSIONAL TESTIMONY. 

The Inspector General of the Federal Deposit Insurance Corporation and the Comptroller General of the United States shall 

appear before the Committee on Banking, Housing, and Urban 

Affairs of the Senate and the Committee on Financial Services 

of the House of Representatives, not later than 150 days after 

the date of publication of the study required under this Act to 

discuss the outcomes and impact of Federal regulations on bank 

examinations and failures. 

SEC. 3. GAO STUDY. 

(a) STUDY.—The Comptroller General of the United States shall 

carry out a study on the following: 

(1) The causes of high levels of bank failures in States 

with 10 or more failures since 2008. 

(2) The procyclical impact of fair value accounting standards. 

(3) The causes and potential solutions for the ‘‘vicious cycle’’ 

of loan write downs, raising capital, and failures. 

(4) An analysis of the community impact of bank failures. 

(5) The feasibility and overall impact of loss share agreements. 

(b) REPORT.—Not later than the end of the 1-year period beginning on the date of the enactment of this Act, the Comptroller 

General shall issue a report to the Congress on the study carried 

out pursuant to subsection (a). 

Approved January 3, 2012. 

Deadline. 

Consultation. 


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