1

The Meeting of the Systemic Resolution Advisory Committee

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Federal Deposit Insurance Corporation Building

Washington, D. C .

Open to Public Observation

June 2 i, 2 0 i i - 8: 35 A. M .

The meeting of the FDIC Systemic Resolution Advisory

Committee (~Committee") was called to order by Sheila C. Bair,

Chairman, Federal Deposit Insurance Corporation (~Corporation"

or ~FDIC") Board of Directors.

The members of the Committee present at the meeting were:

Anat R. Admati, George G.C. Parker Professor of Finance and

Economics, Graduate School of Business, Stanford University,

Stanford, California; Michael Bodson, Chief Operating Officer,

The Depository Trust & Clearing Corporation (~DTCC"), New York,

New York; Charles A. Bowsher, Chairman and Member of the

Research Advisory Council, Glass, Lewis & Company, LLC,

Bethesda, Maryland; Michael Bradfield, Mercersburg,

Pennsylvania; H. Rodgin Cohen, Senior Chairman, Sullivan &

Cromwell LLP, New York, New York¡ William H. Donaldson,

Chairman, Donaldson Enterprises, New York, New York; Janine M.

Guillot, Chief Operating Investment Officer, CalPERS,

Sacramento, California ¡ Richard J. Herring, Jacob Safra

Professor of International Banking and Professor of Finance, The

Wharton School, University of Pennsylvania, Philadelphia,

Pennsylvania; Simon Johnson, Ronald A. Kurtz Professor of

Entrepreneurship, MIT Sloan School of Management, Cambridge,

Massachusetts ¡ Donald Kohn, Senior Fellow, Economic Studies

Program, Brookings Institution, Washington, D.C.; John A.

Koskinen, Non-Executive Chairman of the Board, Freddie Mac,

Washington, D. C.; Jerry Patchan, Hunting Valley, Ohio ¡ John S.

Reed, Chairman, Corporation of MIT, New York, New York¡ Deven

Sharma, President, Standard & Poor's, New York, New York¡ Gary

H. Stern, Director, DTCC, The Dolan Company, and the National

June 2 i, 2 0 i i
2

Council on Economic Education, New York, New York; Paul A.

Volcker, Chairman of the Board of Trustees, Group of 30, New

York, New York¡ and David J. Wright, Visiting European Union

Fellow, St. Antony's College, Oxford, United Kingdom.

Members Peter R. Fisher, Senior Managing Director,

BlackRock, New York, New York; and Raghurman G. Raj an, Eric J.

Gleacher Distinguished Service Professor of Finance, Booth

School of Business, Uni versi ty of Chicago, Chicago, Illinois,

were absent from the meeting.

Members of the Corporation's Board of Directors present at

the meeting were: Sheila C. Bair, Chairman; Martin J. Gruenberg,

Vice Chairman; and Thomas J. Curry, Director (Appointive).

Corporation staff who attended the meeting included:

James H. Angel, Jr., David Barr, Michelle Borzillo, Jason C.

Cave, Glenn E. Cobb, Christine M. Davis, Patricia B. Devoti,

Doreen R. Eberley, Keith L. Edens, Bret D. Edwards, Diane L.

Ellis, Robert E. Feldman, Joseph V. Fellerman, Ralph E. Frable,

Shelia K. Gibson, Andrew Gray, Shannon N. Greco, James J. Hone,

Kenyon T. Kilber, Michael H. Krimminger, Rose M. Kushmeider,

Ellen W. Lazar, Alan W. Levy, Tariq A. Mirza, Arthur J. Murton,

Richard J. Osterman, Jr., Mark E. Pearce, Carolyn D. Rebmann,

Jack Reidhill, Barbara A. Ryan, R. Penfield Starke, Marc

Steckel, F. Angus Tarpley, Jesse o. Villarreal, Cottrell L.

Webster, and James R. Wigand.

William A. Rowe, III, Deputy to the Chief of Staff and

Liaison to the FDIC, Office of the Comptroller of the Currency

(~OCC"); David K. Wilson, Senior Deputy Comptroller for Bank

Supervision Policy, OCC; Mark Levonian, Senior Deputy

Comptroller for Economics, OCC¡ Charlotte M. Bahin, Senior

Counsel for Special Proj ects, Office of Thrift Supervision,

Anthony J. Dowd, and M. Sterloft were also present at the

meeting.

Chairman Bair opened and presided at the meeting. She

began by welcoming the attendees to the inaugural meeting of the

Committee and noting that the Committee's members bring a wide

range of knowledge and expertise that will enhance the

Corporation's work and ensure that, if the need should arise,

the Corporation will be ready to resolve a systemically

important financial company. She then noted that, as guided by

the law, the FDIC, the Board of Governors of the Federal Reserve

System (~FRB"), and the other banking regulatory authorities

have long sought to achieve a delicate balance in the role that

June 21, 2011
3

government plays in the banking industry as it carries out the

important task of promoting confidence and stability through

deposi t insurance and functioning as the lender of last resort,

and the equally important task of upholding prudential

supervision to promote market discipline by limiting the extent

of the government's backstop. The FDIC's staff is working to

implement an updated statutory mandate under the Dodd-Frank Wall

Street Reform and Consumer Protection Act (the ~Dodd-Frank

Act"), which includes, among its many provision, the authority

for the FDIC to resolve a systemically important financial

company, she noted, and, as it does so, there is once again much

debate over the lessons of the recent financial crisis and the

proper role of the government in the financial sector. On the

one hand, she explained, there is the concern that new

regulations could impose onerous costs on banks and the economy,

stifling financial innovation and economic growth¡ and, on the

other hand, there is genuine alarm regarding the immense scale

and seemingly indiscriminate nature of the government assistance

provided to large banks and nonbank financial companies during

the financial crisis and the effects these actions will have on

the competitive landscape of the banking system.

Chairman Bair stated that, in 2008, the United States

experienced a failure or near failure of some of the largest

financial institutions, and most could not be wound down in an

orderly manner when they were no longer viable because maj or

parts of their operations were carried out in nonbank legal

entities subject to the commercial bankruptcy laws rather than

bank receivership laws, resulting in ad hoc responses by the

government that served to reinforce the perception that some

financial institutions are too big to fail. In the wake of the

recent crisis, Chairman Bair continued, the Dodd-Frank Act was

enacted to reform the financial regulatory system and, at its

core, are measures that create a new resolution framework for

nonbank institutions and entities deemed to be so large,

complex, and interconnected that their failure could threaten

overall financial stability. She explained that this new

resolution framework has three basic elements: the establishment

of the Financial Stability Oversight Council ("FSOC"), chaired

by the Secretary of the Treasury and comprised of members from

the other financial regulatory agencies, with the responsibility

of designating systemically important financial companies

(~SIFls" or "covered companies") that will be subj ect to

heightened supervision by the FRB¡ the requirement for the

preparation of detailed resolution plans-often referred to as

~living wills"-by covered companies to demonstrate that they are

resol vable under the bankruptcy laws if they run into severe

June 21, 2011
4

financial stress and provide valuable advance information that

will assist in implementing their orderly liquidation, if

necessary ¡ and the prohibition of bailouts of individual

companies by providing an al ternati ve to bankruptcy with the

establishment of an orderly liquidation authority in Title II,

which allows the FDIC to resolve nonbank financial companies by

using many of the same trustee powers over systemic nonbank

financial companies that it has long used to manage failed bank

receiverships.

After noting that the Committee will provide advice and

recommendations on a broad range of issues relevant to the

failure and resolution of a systemically important financial

company, including the evaluation of different resolution

strategies, Chairman Bair provided a brief overview of the

meeting agenda and introduced Vice Chairman Gruenberg and

Director Curry.

Vice Chairman Gruenberg thanked the Committee members for

agreeing to serve on the Committee and noted that it is an

exceptionally distinguished group, which reflects in some

measure the importance of the Corporation's responsibilities

under the Dodd-Frank Act with regard to both the preparation of

living wills and the execution of the orderly liquidation

authority under Title II. He stated that the advice of the

Committee is viewed as a key element in the Corporation's

efforts to implement those new and unprecedented authorities.

Director Curry also thanked the Committee members for

participating and stated that will be very helpful for the

Corporation's Board to have the Committee's input and advice.

Next, Chairman Bair introduced James R. Wigand, Director,

Office of Complex Financial Institutions ("OCFI"), FDIC, and

Michael H. Krimminger, General Counsel, FDIC, to present an

overview of the Corporation's systemic resolution framework.

Mr. Wigand began by providing a brief summary of some of the key

components of Title I of the Dodd-Frank Act, which establishes

some of the groundwork for building a framework to minimize the

probability of the failure of a large systemically important

financial company. One element of Title I, he explained, was

the creation of the FSOC, which serves as a coordinating body

concerning issues related to systemically important companies

and systemic risks, has the authority to designate certain

nonbank financial companies to be covered companies, and makes

recommendations to the FRB concerning prudential standards and

mechanisms for earlier remediation requirements analogous to

prompt corrective action requirements currently used by the bank

June 21, 2 011
5

regulatory agencies to impose restrictions on problem depository

insti tutions as they become more distressed. He also explained

that a critical component of Title I was the requirement for

covered companies to prepare resolution plans or living wills,

which would allow for the unwinding or orderly resolution of a

covered company through the bankruptcy code in a manner that

does not pose a systemic risk.

Mr. Wigand continued, emphasizing that the preparation of

the resolution plans should be undertaken in conformance with

the bankruptcy code rather than in reliance on the orderly

liquidation authority of Title II, and that it is expected to be

an iterative process. He advised that the resolution plans have

an informational component to provide information on

counterparty exposures, alignment of legal entities with

business units, and funding mechanisms, and a strategic planning

component to provide a strategic analysis that outlines a

conceptual framework for advanced planning with respect to how

the entity is going to respond upon its failure ¡ that if the

resolution plan is ultimately determined not to be credible, the

FDIC and the FRB may take certain actions, such as imposing

capi tal or restructuring requirements on the enti ty¡ and that,

in the event that resolution plan still does not facilitate an

orderly non-systemic resolution under the bankruptcy code, then

ultimately, the FDIC and the FRB may force a divestiture of some

of the business lines associated with the entity.

Next, Mr. Krimminger presented a brief summary of the key

provisions of Title II of the Dodd-Frank Act. He emphasized

that the bankruptcy code remains the primary option for the

resol ution of a covered company, but that Title I I provides an

alternative to the bankruptcy code for resolving a covered

company¡ that Title II is no bailout mechanism, with taxpayers

being barred from absorbing any losses ¡ that, under Title II,

the company's shareholders and unsecured creditors bear any

losses, and, if the receivership assets are insufficient to

cover all of the costs of orderly liquidation, then any

deficiencies are recovered through assessments on the financial

industry¡ and that Title II requires that the management of the

firm be replaced. He then briefly outlined the process for

using the orderly liquidation authority under Title II,

explaining that the process is initiated by a recommendation by

a two-thirds majority vote by the boards of the FDIC and the

FRB; that the recommendation is delivered to the Secretary of

Treasury, who then, in consultation with the President, makes a

determination as to whether to appoint the FDIC as receiver of

the covered company; that the decision is made by the Secretary

June 21, 2011
6

of the Treasury as to whether the covered company should be

placed into receivership under Title II, who must then file a

peti tion with the u. S. District Court for the District of

Columbia seeking judicial review of that decision¡ that, if the

court does not make a determination within 24 hours of receipt

of the Secretary of Treasury's petition, the petition is granted

by operation of law, and the FDIC is appointed as receiver of

the covered company; and that the covered company's board of

directors or other aggrieved parties have 30 days to appeal the

FDIC's appointment as receiver. He also explained that the

provisions of Title II offer four notable elements that differ

from bankruptcy code provisions: the ability to have advance

planning provided by the resolution plans; the ability to act

quickly to resolve the entity or establ ish a bridge entity; the

ability to provide continuity with respect to the entity's

ongoing operations in order to maximize the value of its assets;

and the ability to provide liquidity from the orderly

liquidation fund. He emphasized that, as the receiver for a

resolution under Title II, the FDIC is instructed by the DoddFrank Act to liquidate the covered company in a manner that

maximizes the value of the assets, minimizes losses, mitigates

risk, and minimizes moral hazards.

Following the presentation, Committee members discussed a

number of issues, including the interrelationship of Title I and

Title II, the monitoring of counterparty credit exposure, the

resolution planning process, and the FDIC's exercise of its

orderly liquidation authority. Mr. Herring expressed concern

that there appears to be an inherent logical inconsistency in

the relationship of Title I and Title II because if all of the

institutions are resolvable under bankruptcy, then how can it

suddenly be argued that they cannot be liquidated under

bankruptcy and must be resolved under Title I I; and that there

is the possibility that the FDIC could suddenly have to resolve

a large, complex nonbank financial institution because it

appears systemic. In response, Mr. Wigand explained that Title

I and Title II are interrelated, with the analytical and

detailed resolution planning process of Title I serving as a

risk management tool to mitigate the probability of an

institution's failure and the resolution authority of Title II

providing a backstop; and, Mr. Krimminger, emphasizing that the

interrelationships between Title I and Title II are very vital,

explained that the resolution planning process under Title I

ul timately should lead to companies taking a comprehensive look

at the complexity of their operations if they are going to meet

the Title I standard to be resolved under the bankruptcy code,

since the goal is to ensure that the Title II resolution

June 2 1, 2011
7

authori ty is needed less often. With respect to counterparty

credi t exposures, Mr. Reed asked whether the FDIC has any

surveillance mechanisms in place to alert it, on a real-time

basis, to the development of dangerous concentrations of

counterparty credit exposure or usages. Mr. Wigand responded by

noting that, on a macro basis, the newly created Office of

Financial Research is examining counterparty exposures to

determine where there may be risk concentrations among

counterparties for certain products, and that, on a specific

institution basis, part of the resolution planning process

requires the submittal of information on counterparty credit

exposures. Mr. Krimminger added that OCFI has staff monitoring

the risks of various large institutions over time, and that

there are a number of domestic and international efforts to

enhance the monitoring of counterparty exposures for derivatives

and other types of securities activities.

Noting that the Title I resolution planning process focuses

on individual institutions, Mr. Wright suggested that a greater

concern is the position of the whole market ¡ and that this

points to the need for a real-time reporting system for all

systemic financial institutions that will identify sudden

changes in counterparty exposure concentrations. Mr. Krimminger

stated that one of the FDIC's objectives is to be able to spot

unusual or developing activity in a particular trading area in

order to understand how the market is reacting to various events

and to identify where there may be a market reaction against a

particular insti tution¡ and Mr. Wigand, elaborating on Mr.

Krimminger's response, emphasized that real-time information is

critical in the resolution planning process because the ability

to resolve a company seamlessly is largely dependent on the

accuracy and currency of that information, and that part of the

resolution planning process involves analyzing a covered

company's ability to produce that type of information on a

real-time, or at least timely, basis.

Next, Mr. Bodson indicated that there are conflicting

interests when determining which counterparties to protect at

the point of a failure¡ that bridge entity financing is not

establ ished instantly ¡ that it is important to understand the

ramifications of the sale of assets in a resolution¡ and that

advance planning and coordination is critical. In response, Mr.

Krimminger emphasized that the reason for having the Title II

authori ty is to prevent the systemic consequences that

bankruptcy liquidation might create, and that conflicting

elements always exist when attempting to maximize recoveries and

minimize losses in the context of minimizing moral hazards. Mr.

June 21, 2011
8

Wigand stressed that the Title I I authority does not provide

protection in the manner that the Deposit Insurance Fund

protects insured deposits; that bailouts are precluded by Title

II; and that there is no opportunity for public funds to

subsidi ze creditors' losses. In response to a comment by Mr.

Johnson that it is difficult to avoid the perception that public

funds are not at risk if the FDIC is borrowing from the U. s.

Treasury to provide liquidity to the financial system, Mr.

Krimminger explained that there is no statutory basis for

taxpayer funds to be put in jeopardy because losses are required

to be recovered from the creditors of the failed institution or

through claw backs and assessments on the financial industry.

Wi th respect to the resolution planning process, Ms.

Admati suggested that there is no incentive to provide a

credible living will ¡ and that the 30-day period within which to

challenge the Title II receivership is likely to adversely

affect an orderly liquidation by creating uncertainty regarding

whether or not the company is insolvent. In response, Mr.

Krimminger noted that there currently is a 30-day appeal period

for challenging a decision that the FDIC's appointment as

receiver for a failed bank was arbitrary and capricious; that

the 30 -day appeal period does not stop the receivership from

going forward¡ and that it is the marketplace that ultimately

decides whether the company is insolvent by refusing to provide

funding. He also emphasized that the FDIC and the FRB have the

authority to take increasingly severe actions, including

requiring the divestiture of certain assets and operations, in

order to compel a covered company to provide a living will that

is credible. Mr. Wigand advised that, based on the initial

feedback from companies that have already started the process,

many are finding that the resolution planning process is a risk

management tool, but that he expects any resistance to the

process is likely to surface when results of the analysis of the

resolution plan indicates problems that require certain changes.

Mr. Reed stated that it is important that companies' boards of

directors be held accountable for good resolution plans; and

several Committee members indicated that it will be difficult to

determine whether a complex resolution plan is credible, and

that a determination by the FDIC and the FRB that a plan is

inadequate or requires changes may result in a lawsuit

challenging the decision. In response to Mr. Bradfield's

inquiry as to whether a nonbank financial company can opt for a

Chapter 11 bankruptcy rather than going through the Title II

resolution process, Mr. Krimminger explained that, even if a

company has already filed for bankruptcy under Chapter 11, the

company can be pulled out of bankruptcy and resolved under Title

June 21, 2011
9

I I, if it is determined that the bankruptcy process would create

systemic consequences.

Agreeing with the positions that have been expressed with

respect to the importance of resolution plans, as well as the

recogni tion of their inherent limitations, Mr. Cohen stressed

that planning is essential ¡ and that the resolution plans are

only one half of the equation, with the other half of the

equation consisting of the government's plan as to how it will

exercise its orderly liquidation authority, and whether the FDIC

has its own plans-a Plan A, Plan B, and a Plan C-in the event it

needs to resolve a covered company. Mr. Wigand responded by

noting that there will be information in the Title I resolution

plans that will have some utility if the FDIC is called upon to

exercise its resolution authority under Title II, but he

emphasized that the FDIC will need a different plan to resolve

the entity. He also nored that the FDIC is going through its

own planning exercises to prepare for the resolution of the

systemically important companies using the Title I I mechanism

and the tools available under the statute to resolve the entity.

Elaborating on Mr. Cohen's comments, Mr. Johnson agreed that it

is essential to have effective planning and asked whether the

FDIC will build its plans interactively with real participants

playing roles in a simulation exercise. Mr. Krimminger agreed

that it is essential to do the type of planning analogous to war

game planning scenarios to put the FDIC in the best

informational and strategic position to respond to likely

scenarios; and that the FDIC has the benefit of flexibility,

since it is not bound by a resolution plan that is ineffective.

In response to Mr. Bodson's observations that living wills are

similar to any disaster recovery planning and that, regardless

of the amount of scenario planning, there will still be judgment

calls throughout the process, Mr. Wigand noted that the FDIC's

use of war gaming simulation exercises for failed banks in the

period from 2004 through 2007 proved to be very beneficial to

its ability to handle the crisis that started in 2008.

In response to a question from Mr. Herring regarding how

the FDIC would resolve one of these very large failed entities

without creating a larger and more complicated entity that may

raise systemic issues in the future or create a system that is

much more vulnerable, Mr. Wigand indicated that there is no

desire to create a more complex and more systemic entity as a

result of resolving one; and that the Title I I authority

provides the ability to create a bridge entity that would allow

for a spinoff of some of the failed entity's operations or a

recapitalization of some part of the entity. Mr. Krimminger

June 21, 2011
10

advised that another option would be the sale of parts of the

failed entity to different purchasers in order to avoid the

issue of increased concentration resul ting from a merger of the

whole entity with another large or larger entity; and Chairman

Bair suggested that a situation where a sale of the whole failed

entity to another large entity offers greater value than would

be achieved through a breakup strategy raises an interesting

policy issue concerning the selection of resolution strategies

and the question of whether additional costs, such as the

addi tional costs of putting an even larger, more opaque, and

more complex institution into the market, could be factored into

the bidding process. Mr. Johnson questioned whether the merger

of a failed $2 trillion bank with another $2 trillion bank, for

example, would be favorably viewed from the standpoint of

systemic risk, particularly in view of the difficulties managing

that scale of enterprise in a time of crisis; and Mr. Kohn, in

response, suggested that regulators approving any such

transaction could require the spinoff of certain business lines

in a manner similar to the requirements being discussed by

European bank regulators for certain large mergers. Responding

to an observation by Mr. Johnson that larger banks have an

advantage when bidding for assets if there is the perception of

a ~too big to fail" subsidy or an impl ici t subsidy in the form

of lower funding costs, Mr. Krimminger stated that the

provisions of Title I and Title II are designed to help reduce

the perception of any subsidy by eliminating the bailout option

and by making it less desirable to be large through regulatory

pressures, such as the Basel III surcharge on SIFls and the

resolution planning requirements of Title I, which favor more

efficient operations. Mr. Johnson noted that Europe has many

banks that are very large relative to their economies, and he

suggested that when a bank that large fails it is going to have

a large taxpayer cost one way or another because of potential

credi t losses. Chairman Bair responded by commenting that,

based on the capital structure of these large institutions, the

losses would have to be extreme to go through al 1 of the

shareholder equity, subordinated debt, and unsecured debt and

still end up with losses ¡ and that, as a result, if a large

institution fails, she does not believe there would be an

ultimate taxpayer cost from any net loss that, at least

temporarily, the U. S. Treasury would have to carry through its

lending capability to the FDIC under Title II. She also noted

that there would be an assessment on the industry to absorb any

such losses, and that there are other funding mechanisms, such

as FDIC-guaranteed debt, available to the FDIC without any

borrowing from the U. S. Treasury line of credit.

June 21, 2 011
11

In response to a question from Mr. Bowsher regarding how

the resolution plans will be kept confidential, Mr. Krimminger

explained that there will be some publicly disclosed components

of the plans because of securities law requirements, but that

confidential supervisory information, trade secrets, and other

confidential information provided with the plans would be

protected from disclosure under the FDIC's proposed regulations

and existing statutes. Regarding which creditors bear the

losses of a failed company, Mr. Krimminger, in response to a

question from Ms. Admati, explained that the FDIC has emphasized

in its resolution-related regulations that all creditors are

exposed to loss, and that any creditor can expect to absorb

losses in a resolution, based on the priority structure

establ ished in Title I I; and that, as a result, the market will

adjust over time to the changed expectations of no more

bailouts. Responding to a question from Mr. Bradfield asking

whether one of the negative impacts of the resolution process

will be that companies, particularly nonbank financial

companies, will not be able to fund themselves with unsecured

debt, but only with secured debt that will be exempt from this

new resol ut ion structure, Mr. Krimminger noted that funding with

unsecured debt may cost more, but that it should not make it

uneconomical to use unsecured debt. In response to concerns

raised by several Committee members regarding restrictions on

the ability of the Federal Reserve banks to extend funding for

troubled institutions, Mr. Krimminger explained that, while the

Dodd-Frank Act placed constraints on targeted support to bailout

an individual institution, the statute allows for broad, systemwide liquidity support. Mr. Volcker concluded the discussion by

noting several additional issues raised by the new resolution

regime, including that considerable skepticism remains over

whether the Dodd-Frank Act has removed the government's

authority for a "too big to fail" bailout ¡ that living wills may

give rise to legal challenges, particularly when changes are

required to parts of the company in which there are synergistic

relationships, but which the FDIC and FRB believe should be

broken up ¡ and that there needs to be some understanding among

international regulators to address situations where a foreign

organization has substantial operations in the U. s. and its home

country.

Chairman Bair then announced that the meeting would briefly

recess. Accordingly, at 10:38 a.m., the meeting stood in

recess.

* * * * * * *

June 2 1, 2 011
12

The meeting reconvened at 10: 56 a. m. that same day, at

which time Mr. Wigand introduced Arthur J. Murton, Director,

Division of Insurance and Research (~DIR"); Jack Reidhill,

Chief, Special Studies Section, DIR, FDIC¡ Joseph Fellerman,

Senior Program Analyst, DIR; and F. Angus Tarpley, III, Counsel,

Receivership Policy Unit, Litigation and Resolutions Branch,

Legal Division, to present a panel discussion of a paper

prepared by FDIC staff that examines how the FDIC could have

structured a resolution of Lehman Brothers Holdings Inc.

(~Lehman") under the orderly liquidation authority of Title II

of the Dodd-Frank Act.

Mr. Murton began by providing a brief summary of the events

leading up to Lehman's bankruptcy. He noted that, beginning in

2006, Lehman adopted a more risky growth strategy of taking

risks on its balance sheet; that, after the failure of Bear

Stearns and its acquisition by JPMorgan Chase in March 2008,

Lehman was viewed by many as the next most vulnerable investment

firm and Lehman began to seek additional capital or an

acquisi tion offer; that discussions with Bank of America,

MetLife, and other potential acquirers in the summer of 2008 did

not result in an acquisition, but due diligence by these

entities identified some assets in Lehman's structure that were

problematic to an acquisition; that, after Fannie Mae and

Freddie Mac were placed into conservatorship in late summer

2008, Lehman's liquidity problems became acute and

counterparties began requiring more collateral ¡ that Barclays, a

large U. K. commercial and investment bank, approached Lehman in

early September 2008 to discuss a possible acquisition¡ that

Barclays' due diligence identified an estimated $52 billion of

assets that it would not acquire; that Barclay's abandoned the

transaction on September 14, 2008, after it could not get

regulatory approval from the U. K. authorities ¡ that Lehman filed

for Chapter 11 bankruptcy on September 15, 2008; and that,

shortly after Lehman filed for bankruptcy protection, Lehman's

broker-dealer in the U. K. was placed in administration, and

Lehman's U. S. broker-dealer was placed in liquidation under the

Securi ties Investor Protection Act. Continuing, Mr. Murton

emphasized that the Lehman bankruptcy had an immediate and very

disruptive effect on U. S. financial stability, including the

disruption of the money market mutual fund industry when one of

Lehman's largest creditors, the Reserve Primary Fund-a $62

billion money market fund that held $785 million of Lehman's

commercial paper-sustained a loss of value that caused it to

~break the buck" and required the U. S. Treasury to temporarily

guarantee money market funds. The Lehman bankruptcy is not yet

resolved, he added, and Lehman's general unsecured creditors are

June 2 1, 2 011
13

expected to recover approximately 20 cents for every dollar of

their claims.

Next, Mr. Murton described how the FDIC could have resolved

Lehman under the Title II orderly liquidation authority, stating

that the FDIC would have been on site at Lehman in early 2008,

working with the FRB to gather information to supplement and

update Lehman's resolution plans ¡ that the FDIC would have been

in discussions with Lehman's management and board of directors

to emphasize that raising capital or pursuing a sale of the

company-notwithstanding that any acquisition would be dilutive

in nature-would be a better al ternati ve for shareholders than an

FDIC receivership¡ that the FDIC would have been identifying

Lehman's problems assets and gathering information on its

systems in order to plan a Title II resolution transaction and

bid structure with which in could seek potential acquirers; and

that the FDIC would have contacted appropriate foreign

authorities to discuss potential issues, such as the impact of a

resolution transaction, and to address any concerns on the

eligibility of potential foreign acquirers. In the event

Lehman's management was unable to raise capital or find an

acquirer, Mr. Murton continued, the FDIC would have conducted a

bidding process to find an acquirer for the company, in a manner

similar to the process that typically occurs for a failed

depository institution. He briefly outlined the bid structure

and process that would have occurred, noting that potential

bidders for Lehman would have included parties previously

interested in the company, such as Barclays ¡ that, based on an

estimate of $50-70 billion of problem assets, the FDIC would

have offered the option of a ~good bank-bad bank" resolution-in

which the problematic assets would be segregated and retained

for later disposition and the "good bank" would be transferred

to the acquirer-or the option of a loss-share arrangement-in

which the acquirer purchases all of the company's assets, but

shares in the losses on the pool of problem assets ¡ and that, if

a winning bidder, such as Barclays, was selected, Lehman would

have been placed into receivership and the FDIC, as receiver,

would have sold Lehman's u.s. and U.K. broker-dealer operations

or other parts of the company out of the receivership to

Barclays.

wi th respect to the treatment of Lehman's creditors, Mr.

Murton explained that Lehman had $20 billion of equity at the

time of its failure; that Lehman had $15 billion of subordinated

debt, and $175 billion of other senior debt, including $90

billion of intra-company liabilities; and that, if losses on the

$50-70 billion pool of problem assets had been $40 billion,

June 21, 2011
14

Lehman's general unsecured creditors would have had a recovery

rate of 90 - 97 cents for every dollar of their claims, depending

on the distribution of those losses among the senior debt and

intra-company debt. He concluded by noting that the FDIC staff

believes that a Title II resolution of Lehman would have

preserved the ongoing value of the franchise, imposed losses on

the shareholders, removed management responsible for the losses,

and provided policy makers with a realistic alternative to a

bailout or disorderly bankruptcy.

Responding to a question from Mr. Donaldson regarding the

U.K. authorities' position on a resolution transaction with

Barclays, Mr. Murton stated that the FDIC would have discussed

wi th the U. K. authorities any concerns they may have wi th the

acquisition of Lehman's problematic assets by Barclay, and the

FDIC would have structured the resolution transaction in a

manner that removed those assets, or the risk of those assets,

and allowed Lehman's U. K. broker-dealer to continue to operate

within Barclays. In response to concerns raised by Mr. Volcker

regarding what would have happened on the second, third, and

fourth days immediately after the FDIC completed a resolution of

Lehman, and whether the FDIC expected that there would have been

collateral effects on other firms, Mr. Wigand indicated that,

assuming that it was the winning bidder, Barclays would have

stepped in as the acquirer and operated the institution; and

that there could be unforeseen collateral effects on the markets

resulting from a Title II resolution that may be difficult to

address, such as the signaling effects resulting from a lack of

confidence in the valuation of derivatives or mortgage-related

types of securities that ripples to other firms and precipitates

the unwinding of contracts at fire sale prices. Mr. Volcker

suggested that, even if Lehman was resolved by the FDIC under

Title II, what was at stake here was not about Lehman in some

sense, but that its failure impressed upon the market that there

was $1 trillion of bad credits in the market. Once the market

understood the extent of the problem, Mr. Volcker continued,

everyone wanted more collateral and did not want to invest in

these other investment banks, and, even if the FDIC had had the

Ti tle I I resolution authority, the FDIC possibly would have had

to apply it to other maj or financial companies. In response to

Mr. Volcker's comments, Mr. Murton stressed that there arguably

would have been less creditor losses and disruption with an FDIC

resolution; and Mr. Reidhill added that the Reserve Primary Fund

may not have experienced the losses that disrupted the money

market funds, since the FDIC could have paid an advanced

dividend to provide it with sufficient cash, or Barclays may

have chosen to hold the commercial paper.

June 21, 2 011
15

The discussion continued with Mr. Reed commenting that, if

it had had the Title II resolution authority earlier, the FDIC

probably would have had to intervene with the resolution of five

or six major entities; and Mr. Bodson emphasized that the FDIC

would be running the most leveraged hedge fund on the face of

the earth, since it would have to provide the funding for these

failing entities. Mr. Wigand responded by noting that the FDIC

has the ability in a resolution to quickly monetize creditors'

claims using the failed entities' assets to mitigate any

potential ripple effects or disruption of the market. Mr.

Volcker noted that the extent of the FDIC's resolution authority

may effectively be limited when the banking system is already

burdened with problematic assets. In response, Chairman Bair

stressed that the FDIC's resolution authority by itself cannot

address the lack of lending standards, lack of transparency, and

mischaracterizations in asset securitizations and collateralized

debt obligations, which never should have gone into the market

in the first place; that there has to be supervisory reforms,

including enforcement of higher capital standards that will

provide a more stable base to prevent institutions from having

al 1 of this toxicity on their balance sheets going forward; and

that there needs to be market discipline to complement the

supervisory process for these institutions. In response to Mr.

Reed observing that risk-based models contribute to large

concentrations of mortgage-related securities which can lead to

systemic risks, Chairman Bair noted that some of this problem is

dri ven by regulation and regulatory treatment of risk-weighted

capital standards, which the FDIC has long sought to reform.

Chairman Bair then announced that the meeting would recess

for lunch. Accordingly, at 12:01 p.m., the meeting stood in

recess.

* * * * * * *

The meeting reconvened at 1: 32 p. m. that same day, with Mr.

Wigand introducing Mr. Krimminger and R. Penfield Starke, Senior

Counsel, Receivership Policy Unit, Litigation and Resolutions

Branch, Legal Division, FDIC, to discuss cross-border resolution

issues. Mr. Krimminger began by advising that there is no

binding international insolvency framework to deal with crossborder financial institutions; and that cross-border financial

institutions include banks and nonbank financial companies that

have a subsidiary in a foreign country, an operational entity in

a foreign country without being a separate subsidiary, or assets

and liabilities in foreign jurisdictions, and may also include

June 21, 2 011
16

institutions that are dependent upon certain operational

services provided by entities in foreign jurisdictions. Noting

that the Dodd-Frank Act provides a foundation for regulators in

the international community to discuss cross-border issues, Mr.

Krimminger advised that, since 2007, he has co-chaired a working

group involved with a committee on banking supervision called

the Cross-Border Resolutions Group (~CBRG"), which issued

recommendations in March 2010 to address, in a holistic manner,

three major issues: the powers that a resolution authority

receiver or trustee in bankruptcy might need to effectively

resol ve both domestic and cross-border failures ¡ the areas where

it is possible to establish processes for improving cross-border

coordination and information sharing ¡ and the ways to improve

systemic resiliency and the ability to resolve system resiliency

issues, such as the ability to delay the termination and netting

of derivatives contracts. He also advised that the CBRG's

recommendations have been endorsed by the FSOC ¡ that the FSOC' s

recommendation of those recommendations has been endorsed by the

G20 leaders¡ and that the CBRG will soon be issuing a report on

the progress to date regarding efforts by the G20 and other

countries around the globe to implement those recommendations.

As a preview of the CBRG's report, Mr. Krimminger advised that

numerous countries have adopted a number of the resolution

powers to provide themselves with the capabilities they have had

for domestic institutions, which represents a step forward on

dealing with cross-border issues because it will allow greater

harmonization in the understanding of how the resolution process

works, as well as harmonization of the legal infrastructure ¡

that there has been considerable discussion among international

authorities on how to provide a more coordinated international

resolution process, including the possibility in the distant

future of an international treaty that would create a binding

international framework¡ and that the European Union has made

progress in its efforts to create a more coordinated,

centralized process for dealing with systemic issues and bank

resolutions.

Next, with respect to the abil i ty to implement a Title I I

resolution, Mr. Krimminger summarized the key cross-border legal

conflicts that must be addressed: foreign authorities would need

to recognize the FDIC's appointment as receiver of a failed

insti tution and, if necessary, to recognize a newly-created

financial company as the new owner and operator of the failed

institution's operations in that foreign jurisdiction; automatic

triggers existing in some foreign jurisdiction's laws that allow

the termination of netting of contracts upon an institution's

insolvency would need to be eliminated¡ foreign authorities

June 21, 2011
17

would need to cooperate in allowing a bridge financial company

to operate, to own and operate a subsidiary or branch, and to

meet capital and other requirements applicable to those

operations within that foreign jurisdiction¡ and foreign

jurisdictions would need to be able to recognize the transfer of

ownership of assets held by the bridge financial company,

receivership, and third parties. He advised that the FDIC has

been working with its counterpart in the U.K. to identify a

number of ways under U. K. law to implement a Title II resolution

for a u.s. institution's operations in the U.K. ¡ that the FDIC

is beginning similar initiatives with additional jurisdictions

around the globe; and that these ini tiati ves are viewed as a

practical means to build a more cooperative resolution process

using the FDIC's authority under the Dodd-Frank Act or the

Federal Deposit Insurance Act (~FDI Act"). He further advised

that the goal of these ini tiati ves is to identify potential

conflicts and find ways to work through those conflicts, and to

identify, on a firm-specific basis, the franchise value of a

U. S. institution's operations in a particular foreign location

in relation to its overall franchise value, which will aid the

FDIC as receiver in its understanding of the trade-offs and

risks associated with continuing an the institution's operations

in that jurisdiction.

During the discussion of cross-border issues that followed,

Mr. Krimminger, in response to a question from Ms. Guillot,

advised that the FDIC's Title II resolution authority would

apply to a maj or subsidiary of a foreign bank operating in the

U. S., if it met the criteria of being a financial company and

was a systemic to the U. S. economy; and that this raises a

broader issue, which is the need for international cooperation

regarding the relationship between a resolution plan in the home

jurisdiction of a foreign company and the resolution plan for

its U. S. operations. Regarding ongoing efforts directed toward

harmoni zation, Mr. Wright offered a brief European perspective

on cross-border resolution issues, noting that the European

Commission will be considering a detailed proposal on a crisis

management framework for the financial sector that covers, among

other things, tool kits, early intervention, and resolutions ¡

that the proposed framework emphasizes the need for

harmonization of both tools and processes ¡ and that the European

authorities share a great deal of common thinking with respect

to the legal framework in the U. S., providing a timely

opportunity for cooperation between the European countries and

the U. S. to build a paral lel pol icy framework. With respect to

Europe, Ms. Admati observed that it is di ff icul t to harmoni ze

the different resol ut ion processes, in part, because Europe has

June 21, 2011
18

many different countries and nationalities with different laws;

and that these jurisdictions often have different objectives,

such as Germany's resolution process introduced last year, which

differs from the u.s. or U.K. resolution process because it

focuses more on creditors' rights than systemic stability. Mr.

Krimminger emphasized that Germany's recently introduced

resolution process represents substantial progress from its

previous process that was more typical of a corporate bankruptcy

process, and that it incorporates a number of the features

discussed in the CBRG's recommendations and the Dodd-Frank Act.

Recalling that one of the issues in the Lehman bankruptcy

was that the assets got trapped in New York rather than London,

Mr. Kohn stressed that this illustrates how difficult it is to

build cooperation between countries because there is a tendency

for each country to ring fence and secure as many assets as

possible, and two resolution authorities exist at the same time.

In response, Mr. Krimminger explained that there may not be the

need for two resolution authorities if there is an agreement

during the resolution process or the pre-planning process that

cooperation among the authorities will achieve a better result ¡

and Mr. Wigand suggested that the best approach to resolving

this issue may be to have discussions, on a case-by-case basis,

between regulators to consider the costs and benef i ts of one

particular resolution strategy vis-à-vis another, and to analyze

the impact that a jurisdiction's ring fencing of assets may have

on the entire resolution strategy. Noting that he supports an

international resolution approach because there is unlikely to

be any resolution for these large institutions without it being

international, Mr. Cohen stressed that it is an extremely

difficult task to seek the cooperation of European countries as

long as the U. S. has domestic depositor preference that, in

effect, makes a foreign depositor at a U.K. branch of a u.s.

bank a subordinated creditor ¡ and that this is an issue that

needs to be addressed with a legislative remedy. To the extent

a resolving authority has concerns with respect to the treatment

of their domestic depositors vis-à-vis those of the U. S.

deposi tors, Mr. Wigand responded by suggesting that those

concerns would have to be addressed, at least in the short term,

in a discussion focusing on the quid pro quo associated with the

treatment of those depositors.

Emphasizing that it is constitutionally impossible for some

countries' regulatory authorities to intervene until an

insti tution is declared legally insolvent, Mr. Herring suggested

that this raises a concern regarding the harmonization of the

point of insolvency and the flow of information in cross-border

June 21, 2 011
19

situations because primary regulators have a natural tendency to

keep information from other regulators to avoid losing their

discretion to rehabilitate or resolve a troubled institution

under their supervision. Citing the FDIC's experiences in

dealing with the resolution of a domestic bank with operations

in Hong Kong and a subsidiary in China, Mr. Wigand stated that

the seamless resolution of that bank both domestically and

abroad was due, in part, to the FDIC's discussion of the

structure of the bank's resolution with the foreign regulators

in advance of the bank's failure; and that it was important in

those discussions to segregate supervisory information relating

to the probability of the bank's default from the contingency

planning information related to the resolution. with respect to

a question from Mr. Koskinen regarding whether there is any

harmoni zation of resolution plans for cross -border institutions,

Mr. Krimminger explained that one of the issues being addressed

by the crisis management groups that have been established by

the u. S. and international regulators for all of the large

internationally active u. S. and non-U. S. financial companies is

the resolution planning process, including how to harmonize

resolution planning that a particular home jurisdiction may be

requiring for one of its home companies and the effects that any

such plans would have on a jurisdiction hosting subsidiaries or

branch operations of those companies.

Continuing the discussion on cross-border resolution

issues, Mr. Volcker asked how the resolution planning process

takes into account the possibilities of regulatory arbitrage,

which allows some large financial institutions to operate in

different countries with little supervision by their home

jurisdiction or to relocate to a different country to avoid

intrusive supervision by a host jurisdiction. Acknowledging

that the issue of regulatory arbitrage raises concerns regarding

the reliance on the supervision of a consolidated supervisory

authori ty from a home jurisdiction, as well as broader

implications related to an overall level playing field and the

balance of the competitive nature of the international system,

Mr. Krimminger stated that these concerns highlight the need for

the Basel Committee, FSOC, and others in the international

community to maintain high capital standards across the globe,

and the importance for home jurisdictions to have strong

standards that increase systemic resiliency. With respect to

the Mr. Volcker's question regarding how the FDIC would handle

the resolution of a large global financial company, such as

HSBC, which has operations allover the world, Mr. Wigand

emphasized that the FDIC's mandate under the Dodd-Frank Act is

focused on the systemic risk that is posed to the U. S., which

June 21, 2011
20

limits its ability to control that risk to operations located in

the u. S.; and that, through cross-border discussions, the FDIC

is able to point out the systemic risk issues arising from the

home country resolution process that would impact the resolution

process in the U. S . Ms. Guillot suggested that market

discipline may playa role in limiting regulatory arbitrage

because, in theory, stronger regulatory environments should

benefit from a lower cost of funding.

Mr. Krimminger, in response to Chairman Bair suggesting

that large global companies could simplify their international

operations, noted that one option for controlling risk in host

companies, particularly in the context of consolidated

supervision, would be the establishment of requirement that

companies could only do business in the host jurisdiction

through subsidiaries. Elaborating on the option of requiring

subsidiaries in host j urisdict ions, Mr. Krimminger explained

that, from the industry perspective, there are concerns with the

loss of the efficiencies in the ability to raise funds on a

global basis and loss of the benefits, such as higher ratings,

that operating branches and other operations may derive from

their home entity¡ and that, from a host jurisdiction's

perspective-particularly a small country that has less influence

over the consolidated supervisor of a large global company-there

are the benefits of having control over the capital, liquidity,

and other aspects of the subsidiary that allow the host

jurisdiction to manage risk. Based on the experiences of 2008,

he continued, whether an entity is a branch or a subsidiary is

often meaningless because, in a crisis, host jurisdictions will

take the entity apart as if it is a subsidiary, whenever it is

in their own interests, in a manner that is very much akin to

ring fencing.

Chairman Bair then announced that the meeting would briefly

recess. Accordingly, at 2: 29 p. m., the meeting stood in recess.

* * * * * * *

The meeting reconvened at 2: 45 p. m. that same day with Mr.

Wigand advising that Marc Steckel, Associate Director, Financial

Risk Management Branch, DIR, FDIC, Mr. Krimminger, and Mr.

Starke would present the final panel discussion of the

Committee's meeting, which would focus on derivatives and

qualified financial contracts (~QFCs") in the resolution

process. Noting that the Dodd-Frank Act requires a number of

changes in the way that deri vat i ves are transacted, Mr. Steckel

began by explaining that the panel's discussion would cover how

June 21, 2011
21

deri vati ves and repurchase agreements are treated in both the

bankruptcy process and the Title II resolution process. He

advised that deri vati ves and repurchase agreements receive

preferential treatment in bankruptcy and are not subj ect to the

automatic stay or avoidance provisions of the bankruptcy code ¡

that, upon an entity's bankruptcy, sol vent counterparties of

derivatives and repurchase agreements are able to move quickly

to protect their interests; that contracts for derivatives and

repurchase agreements are aggregated by counterparty and the

counterparty's affiliates and handled as a group for netting ¡

and that the rationale behind this treatment of derivatives and

repurchase agreements is that it avoids the possibility of

cascading bankruptcies or systemic problems that otherwise could

be caused by staying these transactions.

Mr. Steckel continued, explaining that the Dodd-Frank Act

envisions similarities between a Title II resolution and how the

FDIC as receiver of a failed bank has handled derivatives and

repurchase agreements ¡ that the FDIC as receiver of a failed

bank has one business day to determine how deri vati ves and

repurchase agreements will be handled; and that the FDIC as

receiver of a failed bank has three options, which are governed

by the least-cost test of the FDI Act: to pass all of the

counterparties' positions to a bridge bank or acquirer ¡ to

repudiate all of the contracts ¡ or to leave all of the contracts

in the receivership to be handled under the receivership claims

process. He also advised that the FDIC, in 2009, began

requiring certain troubled banks to demonstrate the capacity to

organize and present information in a manner that will allow the

FDIC as receiver to make timely QFC determinations, and that the

Dodd-Frank Act requires that this recordkeeping be expanded more

broadly to include bank holding companies and nonbank financial

companies.

Mr. Krimminger continued the panel's discussion of the

treatment of derivatives by observing that the netting

protections for derivatives in insolvency laws represent one of

the most successful examples of legal harmonization because the

International Swaps and Derivatives Association, Inc., and a

number of other trade associations in the U. S ., Europe, and Asia

have succeeded in getting virtually all of the major

industrialized countries to adopt provisions in derivative

contracts that protect the netting rights of counterparties upon

insolvency. He indicated that the ability to determine and net

derivative contracts may work effectively when there is an

idiosyncratic failure or the absence of widespread loss of value

in the market similar to that which occurred in 2008, but the

June 21, 2 011
22

failure of a very large participant or a period of widespread

distress arguably can have some very deleterious effects upon

systemic civility, particularly if multiple firms sell their

collateral on the market simultaneously, creating a downward

spiral in the value of that collateral and making an illiquid

market even more illiquid. Mr. Krimminger also indicated that

one of the most important aspects of the FDI Act for failed

banks, and the Dodd-Frank Act in the case of nonbank financial

companies, is the ability of the FDIC as receiver to transfer

derivative contracts where it would add value to the bridge bank

or bridge company, or to a third party, which avoids adding

collateral to an illiquid market and mitigates any systemic

effects on other firms; and that this represents another area

where it is important to have cross-border harmonization because

the incorporation of a brief delay in termination netting

incorporated into both contractual provisions and other

countries' laws will provide more stabilization in the market.

Mr. Herring commented that the protections for derivative

contracts have become too broad in preserving all derivatives in

the resolution process and need to be changed by, for example,

protecting only derivatives collateralized by cash. In

response, Chairman Bair noted that the FDIC's regulations

strongly emphasize that counterparties not collateralized by

liquid collateral, such as Treasury notes or Treasury-backed

securi ties, will be subj ect to haircuts in the receivership

process; and Mr. Krimminger suggested that another approach to

dealing with overly broad protection of derivatives may be to

narrow the definitions of the types of contracts included in the

netting pool. Mr. Cohen noted that the role of derivatives has

changed radically and their volume has grown explosively since

the provisions allowing netting went into effect in the 1990' s,

and he suggested that a better approach would be to reduce the

gambling aspect of derivatives through the regulatory process

rather than providing broad authority to distinguish between

types of deri vati ve contracts on an ad hoc basis during the

resolution process. Mr. Krimminger, in agreement, emphasized

that it is better to have as much certainty and clarity as

possible in the definitions for determining what would be

included, and what would not be included, in the netting pool

than to leave that question open to an ad hoc decision making

process ¡ and Mr. Reed suggested that narrower is better because

the market will treat it differently if it is clear that a

contract will be outside of any bankruptcy protection. While

the resolution planning process is expected to provide a better

understanding of counterparty credit exposure concentrations,

Mr. Herring observed, the presence of credit default swaps can

June 21, 2011
23

make it difficult to ascertain which counterparty holds the

risk. Mr. Cohen noted that this may make a resolution under the

orderly liquidation authority preferable over the bankruptcy

process because, if creditor consent is required, the actual

credi tors may have totally different interests; and Mr.

Krimminger agreed, noting that the FDIC has seen this problem in

major bankruptcies where the creditors' committee is comprised

of creditors who formally have a credit exposure but no real

risk because they are protected through credit default swaps and

other types of structures, and have interests in other aspects

of the transactions.

Chairman Bair thanked the Committee members for dedicating

the time to provide their valuable contributions to the FDIC and

the Committee's initial meeting. She emphasized that the issues

discussed at today's meeting are difficult ones that are

solvable with a lot of hard work, and noted that it will be

helpful to have the Committee members' input. Vice Chairman

Gruenberg stated that the establishment of the Committee is one

of the many legacy contributions that Chairman Bair has made to

the FDIC. He noted that this initial meeting has already proven

the value of the Committee, and stated that he looks forward to

continuing to work with the Committee members.

There being no further business, the meeting was adj ourned.

Rob~ . Feldman #~L

Executive Secretary

Federal Deposit Insurance Corporation

And Committee Management Officer

FDIC Systemic Resolution Advisory

Committee

June 21, 2011
Minutes

of

The Meeting of the Systemic Resolution Advisory Committee

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Federal Deposit Insurance Corporation Building

Washington, D. C.

Open to Public Observation

June 21, 2011 - 8: 35 A. M.

I hereby certify that, to the best of my knowledge, the attached

minutes are accurate and complete.

~l'n~

Acting Chairman

Board of Directors

Federal Deposit Insurance Corporation