I 

112TH CONGRESS 

1ST SESSION H. R. 2428 

To protect the taxpayers of the United States by limiting the Federal payment 

of legal fees for current and former officers and affiliated parties of 

Fannie Mae and Freddie Mac. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 6, 2011 

Mr. NEUGEBAUER (for himself, Mr. BACHUS, Mr. GARRETT, Mr. JONES, Mr. 

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

A BILL 

To protect the taxpayers of the United States by limiting 

the Federal payment of legal fees for current and former 

officers and affiliated parties of Fannie Mae and Freddie 

Mac. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘GSE Legal Fee Reduc5 tion Act of 2011’’. 


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1 SEC. 2. LIMITATIONS ON INDEMNIFICATION OF LEGAL 

2 FEES. 

3 (a) LIMITATIONS.—Section 1318 of the Federal 

4 Housing Enterprises Financial Safety and Soundness Act 

5 of 1992 (12 U.S.C. 4518) is amended by adding at the 

6 end the following new subsection: 

7 ‘‘(f) PROCEDURES FOR ADVANCEMENT AND INDEM8 NIFICATION OF LEGAL FEES.—The Director shall, by reg9 ulation, establish requirements prescribing the procedures 

10 and terms for advancement of amounts by an enterprise 

11 for qualified indemnification payments for the benefit of 

12 any entity-affiliated party, which shall provide as follows: 

13 ‘‘(1) DETERMINATION OF REASONABLE EX14 PENSES.— 

15 ‘‘(A) PROPOSED CRITERIA.—If at any time 

16 an enterprise is required, pursuant to law, regu17 lation, order, bylaw, or agreement or contract, 

18 to make a qualified indemnification payment for 

19 the benefit of an entity-affiliated party, the Di20 rector shall require the enterprise to submit to 

21 the Director proposed criteria to be used in de22 termining, at the time for the advancement of 

23 amounts for such payment, whether the liability 

24 or legal expenses for which such payment is to 

25 be made is reasonable, which shall include— 


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1 ‘‘(i) methods and procedures for mak2 ing such determinations; 

3 ‘‘(ii) a process for review and appeal 

4 of such determinations; and 

5 ‘‘(iii) terms and conditions for advanc6 ing amounts for liability or legal expenses 

7 determined to be reasonable. 

8 ‘‘(B) REVIEW.—Upon receipt of proposed 

9 criteria submitted pursuant to subparagraph 

10 (A), the Director shall promptly review such 

11 proposed criteria and approve or disapprove 

12 such criteria based on a determination of 

13 whether such criteria will ensure that amounts 

14 are advanced only for qualified indemnification 

15 payments for liability or legal expenses that are 

16 reasonable. 

17 ‘‘(2) CLAIMS OF FRAUD, MORAL TURPITUDE, 

18 AND BREACH OF FIDUCIARY DUTY.— 

19 ‘‘(A) BYLAWS.—The Director shall require 

20 each enterprise to adopt bylaws requiring any 

21 entity-affiliated party accused in any claim, pro22 ceeding, or action, whether administrative, civil, 

23 or criminal of fraud, moral turpitude, or breach 

24 of fiduciary duty to post collateral, security, 

25 bonding, or other assurances of repayment. 


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1 ‘‘(B) REQUIREMENT TO POST BOND.—The 

2 Director shall require any entity-affiliated party 

3 accused in any claim, proceeding, or action, 

4 whether administrative, civil, or criminal, of 

5 fraud, moral turpitude, or breach of fiduciary 

6 duty to post collateral, security, bonding, or 

7 other assurances of repayment. 

8 ‘‘(3) PROHIBITION OF USE OF AMOUNTS BOR9 ROWED FROM TAXPAYERS FOR SETTLEMENT

10 COSTS.— 

11 ‘‘(A) PROHIBITION.—The Director shall 

12 prohibit an enterprise from using any Treasury 

13 funds to satisfy any settlement, judgment, 

14 order, or penalty. 

15 ‘‘(B) TREASURY FUNDS.—For purposes of 

16 subparagraph (A), the term ‘Treasury funds’ 

17 means amounts obtained by an enterprise pur18 suant to— 

19 ‘‘(i) purchase by the Secretary of the 

20 Treasury of obligations or securities of the 

21 enterprise pursuant to— 

22 ‘‘(I) subsection (c) or (g) of sec23 tion 304 of the Federal National 

24 Mortgage Association Charter Act (12 

25 U.S.C. 1719); 


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1 ‘‘(II) subsection (c) or (l) of sec2 tion 306 of the Federal Home Loan 

3 Mortgage Corporation Act (12 U.S.C. 

4 1455); or 

5 ‘‘(III) subsection (i) or (l) of sec6 tion 11 of the Federal Home Loan 

7 Bank Act (12 U.S.C. 1431); or 

8 ‘‘(ii) any other lending, advance, sub9 sidy, payment, appropriation, or purchase 

10 of any obligation or security, by the Fed11 eral Government or any agency or entity of 

12 the Federal Government. 

13 ‘‘(C) ASSETS TO BE USED FOR SETTLE14 MENT COSTS.—An enterprise shall satisfy any 

15 settlement, judgment, order, or penalty, to the 

16 maximum extent possible, with proceeds from 

17 the sale of assets of the enterprise, including 

18 assets in the retained portfolio of the enterprise 

19 and real estate owned of the enterprise and 

20 other physical assets of the enterprise. 

21 ‘‘(4) NOTIFICATION OF SETTLEMENT.—The Di22 rector shall prohibit an enterprise from entering into 

23 any consent decree or settlement of any claim, pro24 ceeding, or action involving an entity-affiliated party 

25 that will result in any qualified indemnification payVerDate Mar 15 2010 03:03 Jul 08, 2011 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2428.IH H2428

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1 ments in an aggregate amount exceeding $1,000,000 

2 before the expiration of the 30-day period beginning 

3 upon the submission by the Director to the Com4 mittee on Financial Services of the House of Rep5 resentatives and the Committee on Banking, Hous6 ing, and Urban Affairs of the Senate of notification 

7 of such proposed consent decree or settlement and 

8 the terms and amount of the qualified indemnifica9 tion payments involved. 

10 ‘‘(5) DEFINITIONS.—For purposes of this sub11 section, the following definitions shall apply: 

12 ‘‘(A) QUALIFIED INDEMNIFICATION PAY13 MENT.—The term ‘qualified indemnification 

14 payment’ means any payment (or agreement to 

15 make any payment) by an enterprise for the 

16 benefit of any person who is or was an entity17 affiliated party, to pay or reimburse such per18 son for any liability or legal expense with re19 gard to any claim, proceeding, or action, wheth20 er administrative, civil, or criminal. 

21 ‘‘(B) OTHER DEFINITIONS.—The terms ‘li22 ability or legal expense’ and ‘payment’ have the 

23 meanings given such terms in subsection 

24 (e)(5).’’. 


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1 (b) APPLICABILITY.—The amendment made by sub2 section (a) shall apply with respect to any advancement 

3 of amounts for a qualified indemnification payment for the 

4 benefit of an entity-affiliated party that is made after the 

5 date of the enactment of this Act. 

Æ 


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