IB 

Union Calendar No. 120 

112TH CONGRESS 

1ST SESSION H. R. 2056 

[Report No. 112–182] 

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 

JULY 26, 2011 

Additional sponsors: Mr. GRIMM, Mrs. MALONEY, Mr. HINOJOSA, Mr. 

SCHWEIKERT, Mr. MANZULLO, Mr. MCINTYRE, and Ms. HAYWORTH

JULY 26, 2011 

Committed to the Committee of the Whole House on the State of the Union 

and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on May 31, 2011] 


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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. 


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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 De5 posit Insurance Corporation (FDIC) shall conduct a com6 prehensive study on the impact of the failure of insured de7 pository institutions. 

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

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

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

11 Federal Deposit Insurance Act (12 U.S.C. 1813(c)); 

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

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

14 equity fund’’ in section 13(h)(2) of the Bank Holding 

15 Company Act of 1956 (12 U.S.C. 1851(h)(2)); and 

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

17 on a performing asset held by an insured depository 

18 institution that causes such institution to raise more 

19 capital in order to cover the write down. 

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

21 study under this section, the Inspector General shall address 

22 the following: 

23 (1) LOSS-SHARING AGREEMENTS.—The effect of 

24 loss-sharing agreements (LSAs), including— 


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1 (A) the impact of loss-sharing on the in2 sured depository institutions that survive and 

3 the borrowers of insured depository institutions 

4 that fail, including— 

5 (i) the impact on the rate of loan 

6 modifications and adjustments; 

7 (ii) whether more types of loans (such 

8 as commercial (including land development 

9 and 1- to 4-family residential and commer10 cial construction loans), residential, or 

11 small business loans) could be modified with 

12 fewer LSAs, or if LSAs could be phased out 

13 altogether; 

14 (iii) the FDIC’s policies and proce15 dures for monitoring LSAs, including those 

16 designed to ensure institutions are not im17 prudently selling assets at a depressed 

18 value; 

19 (iv) the impact on the availability of 

20 credit; and 

21 (v) the impact on loans with partici22 pation agreements outstanding with other 

23 insured depository institutions; 

24 (B) the FDIC’s policies and procedures for 

25 terminating LSAs and mitigating the risk of acVerDate Mar 15 2010 20:40 Jul 26, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H2056.RH H2056

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1 quiring institutions having substantial assets re2 maining in their portfolio when the LSAs are 

3 due to expire; 

4 (C) the extent to which LSAs provide incen5 tives for loan modifications and other means of 

6 increasing the probability of commercial assets 

7 being considered ‘‘performing’’; 

8 (D) the nature and extent of differences for 

9 modifying residential assets and working out 

10 commercial real estate under LSAs; and 

11 (E) methods of ensuring the orderly end of 

12 expiring LSAs to prevent any adverse impact on 

13 borrowing, real estate industry and the Deposi14 tors Insurance Fund. 

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

16 losses, including— 

17 (A) the number of insured depository insti18 tutions that have been placed into receivership or 

19 conservatorship due to paper losses; 

20 (B) the impact on paper losses of raising 

21 more capital; 

22 (C) the effect of changes in the application 

23 of the fair value of real estate accounting rules 

24 and other accounting standards; 


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1 (D) whether field examiners are using prop2 er appraisal procedures with respect to paper 

3 losses; and 

4 (E) methods of stopping the vicious down5 ward spiral of losses and write downs. 

6 (3) APPRAISALS.— 

7 (A) The number of insured depository insti8 tutions placed into receivership or conservator9 ship due to asset write-downs and the policies 

10 and procedures for evaluating the adequacy of an 

11 insured depository institution’s allowance for 

12 loan and lease losses. 

13 (B) The policies and procedures examiners 

14 use for evaluating the appraised values of prop15 erty securing real estate loans and the extent to 

16 which those policies and procedures are followed. 

17 (C) FDIC field examiner implementation of 

18 guidance issued December 2, 2010, titled ‘‘Agen19 cies Issue Final Appraisal and Evaluation 

20 Guidelines’’. 

21 (4) CAPITAL.— 

22 (A) The factors that examiners use to assess 

23 the adequacy of capital at insured depository in24 stitutions, including the extent to which the 

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1 tion’s loan portfolio is considered in the exam2 iners’ assessment. 

3 (B) The number of applications received by 

4 the FDIC from private capital investors to ac5 quire insured depository institutions in receiver6 ship, the factors used by the FDIC in evaluating 

7 the applications, and the number of applications 

8 that have been approved or not approved, includ9 ing the reasons pertaining thereto. 

10 (C) The policies and procedures associated 

11 with the evaluation of potential private invest12 ments in insured depository institutions and the 

13 extent to which those policies and procedures are 

14 followed. 

15 (5) WORKOUTS.—The success of FDIC field ex16 aminers in implementing FDIC guidelines titled 

17 ‘‘Policy Statement on Prudent Commercial Real Es18 tate Loan Workouts’’ (October 31, 2009) regarding 

19 workouts of commercial real estate, including— 

20 (A) whether field examiners are using the 

21 correct appraisals; and 

22 (B) whether there is any difference in im23 plementation between residential workouts and 

24 commercial (including land development and 1- 


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1 to 4-family residential and commercial construc2 tion loans) workouts. 

3 (6) ORDERS.—The application and impact of 

4 consent orders and cease and desist orders, includ5 ing— 

6 (A) whether such orders have been applied 

7 uniformly and fairly across all insured deposi8 tory institutions; 

9 (B) the reasons for failing to apply such or10 ders uniformly and fairly when such failure oc11 curs; 

12 (C) the impact of such orders on the ability 

13 of insured depository institutions to raise cap14 ital; 

15 (D) the impact of such orders on the ability 

16 of insured depository institutions to extend or 

17 modify credit to existing and new borrowers; and 

18 (E) whether individual insured depository 

19 institutions have improved enough to have such 

20 orders removed. 

21 (7) FDIC POLICY.—The application and impact 

22 of FDIC policies, including— 

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1 cially in States where more than 10 such institu2 tions have failed since 2008; 

3 (B) whether the FDIC fairly and consist4 ently applies capital standards when an insured 

5 depository institution is successful in raising 

6 private capital; and 

7 (C) whether the FDIC steers potential inves8 tors away from insured depository institutions 

9 that may be in danger of being placed in receiv10 ership or conservatorship. 

11 (8) PRIVATE EQUITY COMPANIES.—The FDIC’s 

12 handling of potential investment from private equity 

13 companies in insured depository institutions, includ14 ing— 

15 (A) the number of insured depository insti16 tutions that have been approved to receive pri17 vate equity investment by the FDIC; 

18 (B) the number of insured depository insti19 tutions that have been rejected from receiving 

20 private equity investment by the FDIC; and 

21 (C) the reasons for rejection of private eq22 uity investment when such rejection occurs. 

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

24 of the enactment of this Act, the Inspector General shall sub25 mit to Congress a report— 


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1 (1) on the results of the study conducted pursu2 ant to this section; and 

3 (2) any recommendations based on such study. 

4 (e) COORDINATION BETWEEN FDIC IG, TREASURY IG, 

5 AND FEDERAL RESERVE IG.—In carrying out this section, 

6 the Inspector General of the FDIC shall consult with the 

7 Inspectors General of the Treasury and of the Federal Re8 serve System, and such Inspectors General shall provide 

9 any documents or other material requested by the Inspector 

10 General of the FDIC in order to carry out this section. 

11 SEC. 2. FUNDING. 

12 The FDIC shall make available from the portion of the 

13 FDIC budget allocated to management expenses, sums al14 lowing the FDIC Inspector General to complete this study. 

15 SEC. 3. GAO STUDY. 

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

17 States shall carry out a study on the following: 

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

19 states with 10 or more failures since 2008. 

20 (2) The procyclical impact of fair value account21 ing standards. 

22 (3) The causes and potential solutions for the 

23 ‘‘vicious cycle’’ of loan write downs, raising capital, 

24 and failures. 


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1 (4) An analysis of the community impact of 

2 bank failures. 

3 (5) The feasibility and overall impact of loss 

4 share agreements. 

5 (b) REPORT.—Not later than the end of the 1-year pe6 riod beginning on the date of the enactment of this Act, 

7 the Comptroller General shall issue a report to the Congress 

8 on the study carried out pursuant to subsection (a). 


emcdonald on DSK2BSOYB1PROD with BILLS
Union Calendar No. 120 

112TH CONGRESS 

1ST SESSION H. R. 2056 

[Report No. 112–182] 

A BILL 

To instruct the Inspector General of the Federal 

and for other purposes. pact of insured depository institution failures, Deposit Insurance Corporation to study the imJULY 26, 2011 

Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 


emcdonald on DSK2BSOYB1PROD with BILLS