```

[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2056 Enrolled Bill (ENR)]

        H.R.2056

                      One Hundred Twelfth Congress

                                 of the

                        United States of America

                          AT THE FIRST SESSION

         Begun and held at the City of Washington on Wednesday,
            the fifth day of January, two thousand and eleven

                                 An Act

 
   To instruct the Inspector General of the Federal Deposit Insurance 
   Corporation to study the impact of insured depository institution 
                    failures, and for other purposes.

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

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.
```