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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2056 Engrossed in House (EH)]

112th CONGRESS
  1st Session
                                H. R. 2056

_______________________________________________________________________

                                 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));
            (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)); and
            (3) the term ``paper-loss'' means any write down on a 
        performing asset held by an insured depository institution that 
        causes such institution to raise more capital in order to cover 
        the write down.
    (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) Paper losses.--The significance of paper losses, 
        including--
                    (A) the number of insured depository institutions 
                that have been placed into receivership or 
                conservatorship due to paper losses;
                    (B) the impact on paper losses of raising more 
                capital;
                    (C) the effect of changes in the application of the 
                fair value of real estate accounting rules and other 
                accounting standards;
                    (D) whether field examiners are using proper 
                appraisal procedures with respect to paper losses; and
                    (E) methods of stopping the vicious downward spiral 
                of losses and write downs.
            (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. FUNDING.

    The FDIC shall make available from the portion of the FDIC budget 
allocated to management expenses, sums allowing the FDIC Inspector 
General to complete this study.

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).

            Passed the House of Representatives July 28, 2011.

            Attest:

                                                                 Clerk.
112th CONGRESS

  1st Session

                               H. R. 2056

_______________________________________________________________________

                                 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.
```