I 

112TH CONGRESS 

1ST SESSION H. R. 2056 

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

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 31, 2011 

Mr. WESTMORELAND (for himself, Mr. DAVID SCOTT of Georgia, Mr. BROUN

of Georgia, Mr. GARY G. MILLER of California, Mr. POSEY, Mr. 

MARCHANT, and Mr. MACK) introduced the following bill; which was referred to the Committee on Financial Services 

A BILL 

To instruct the Inspector General of the Federal Deposit 

Insurance Corporation to study the impact of insured 

depository institution failures, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. INSPECTOR GENERAL STUDY. 

4 (a) STUDY.—The Inspector General of the Federal 

5 Deposit Insurance Corporation (FDIC) shall conduct a 

6 comprehensive study on the impact of the failure of in7 sured depository institutions. 

8 (b) DEFINITIONS.—For purposes of this Act— 


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1 (1) the term ‘‘insured depository institution’’ 

2 has the meaning given such term in section 3(c) of 

3 the Federal Deposit Insurance Act (12 U.S.C. 

4 1813(c)); 

5 (2) the term ‘‘private equity company’’ has the 

6 meaning given the terms ‘‘hedge fund’’ and ‘‘private 

7 equity fund’’ in section 13(h)(2) of the Bank Hold8 ing Company Act of 1956 (12 U.S.C. 1851(h)(2)); 

9 and 

10 (3) the term ‘‘paper-loss’’ means any write 

11 down on an asset held by an insured depository in12 stitution that causes such institution to raise more 

13 capital in order to cover the write down. 

14 (c) MATTERS TO BE STUDIED.—In conducting the 

15 study under this section, the Inspector General shall ad16 dress the following: 

17 (1) LOSS-SHARING AGREEMENTS.—The effect 

18 of loss-sharing agreements (LSAs), including— 

19 (A) The impact of loss-sharing on the in20 sured depository institutions that survive and 

21 the borrowers of insured depository institutions 

22 that fail, including— 

23 (i) the impact on the rate of loan 

24 modifications and adjustments; 


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1 (ii) whether more types of loans (such 

2 as commercial, residential, or small busi3 ness loans) could be modified with fewer 

4 LSAs, or if LSAs could be phased out alto5 gether; 

6 (iii) the impact on current borrowers 

7 seeking loan modification from an acquir8 ing institution with an LSA; 

9 (iv) the impact on the availability of 

10 credit; and 

11 (v) the impact on loans with participa12 tion agreements outstanding with other in13 sured depository institutions; 

14 (B) The effect of FDIC policies and proce15 dures regarding maturing LSAs, including— 

16 (i) any impact LSAs may have on 

17 continuing weakness in the real estate 

18 market; and 

19 (ii) the likelihood that banks will sell 

20 off assets to take advantage of LSAs be21 fore such agreements are no longer avail22 able; and 

23 (C) Methods of ensuring the orderly end of 

24 expiring LSAs to prevent any adverse impact 


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1 on borrowing, real estate industry and the De2 positors Insurance Fund. 

3 (2) PAPER LOSSES.—The significance of paper 

4 losses, including— 

5 (A) the number of insured depository insti6 tutions that have been placed into receivership 

7 or conservatorship due to paper losses; 

8 (B) the impact on paper losses of raising 

9 more capital; 

10 (C) the effect of changes in the application 

11 of the fair value of real estate accounting rules 

12 and other accounting standards; 

13 (D) whether field examiners are using 

14 proper appraisal procedures with respect to 

15 paper losses; and 

16 (E) methods of stopping the vicious down17 ward spiral of losses and write downs. 

18 (3) WORKOUTS.—The success of FDIC field ex19 aminers in implementing FDIC guidelines titled 

20 ‘‘Policy Statement on Prudent Commercial Real Es21 tate Loan Workouts’’ (October 31, 2009) regarding 

22 workouts of commercial real estate, including— 

23 (A) whether field examiners are using the 

24 correct appraisals; and 


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1 (B) whether there is any difference in im2 plementation between residential workouts and 

3 commercial workouts. 

4 (4) ORDERS.—The application and impact of 

5 consent orders and cease and desist orders, includ6 ing— 

7 (A) whether such orders have been applied 

8 uniformly and fairly across all insured deposi9 tory institutions; 

10 (B) the reasons for failing to apply such 

11 orders uniformly and fairly when such failure 

12 occurs; 

13 (C) the impact of such orders on the abil14 ity of insured depository institutions to raise 

15 capital; 

16 (D) the impact of such orders on the abil17 ity of insured depository institutions to extend 

18 credit to existing and new borrowers; 

19 (E) whether individual insured depository 

20 institutions have improved enough to have such 

21 orders removed; and 

22 (F) the reasons for failure where insured 

23 depository institutions have not so improved. 

24 (5) FDIC POLICY.—The application and impact 

25 of FDIC policies, including— 


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1 (A) the impact of FDIC policies on the pri2 vate capitalization of insured depository institu3 tions, especially in States where more than 10 

4 such insitutions have failed since 2008; 

5 (B) whether the FDIC fairly and consist6 ently applies capital standards when an insured 

7 depository institution is successful in raising 

8 private capital; and 

9 (C) whether the FDIC steers potential in10 vestors away from insured depository institu11 tions that may be in danger of being placed in 

12 receivership or conservatorship. 

13 (6) PRIVATE EQUITY COMPANIES.—The FDIC’s 

14 handling of potential investment from private equity 

15 companies in insured depository institutions, includ16 ing— 

17 (A) the number of insured depository insti18 tutions that have been approved to receive pri19 vate equity investment by the FDIC; 

20 (B) the number of insured depository insti21 tutions that have been rejected from receiving 

22 private equity investment by the FDIC; and 

23 (C) the reasons for rejection of private eq24 uity investment when such rejection occurs. 


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1 (d) REPORT.—Not later than one year after the date 

2 of the enactment of this Act, the Inspector General shall 

3 submit to Congress a report— 

4 (1) on the results of the study conducted pursu5 ant to this section; and 

6 (2) any recommendations based on such study. 

7 SEC. 2. FUNDING. 

8 The FDIC shall make available from the portion of 

9 the FDIC budget allocated to management expenses, sums 

10 allowing the FDIC Inspector General to complete this 

11 study. 

Æ 


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