I
107TH CONGRESS
1ST SESSION
H. R. 3211
To revise the banking and bankruptcy insolvency laws with respect to the
termination and netting of financial contracts, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 1, 2001
Mr. TOOMEY (for himself, Mr. LEACH, Mr. KANJORSKI, Mr. OXLEY, Mr. LA-
FALCE, and Mr. BAKER) introduced the following bill; which was referred
to the Committee on Financial Services, and in addition to the Committee
on the Judiciary, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To revise the banking and bankruptcy insolvency laws with
respect to the termination and netting of financial con-
tracts, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Financial Contracts Bankruptcy Reform Act of 2001’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Treatment of certain agreements by conservators or receivers of insured
depository institutions.
Sec. 3. Authority of the corporation with respect to failed and failing institu-
tions.
Sec. 4. Amendments relating to transfers of qualified financial contracts.
Sec. 5. Amendments relating to disaffirmance or repudiation of qualified finan-
cial contracts.
Sec. 6. Clarifying amendment relating to master agreements.
Sec. 7. Federal Deposit Insurance Corporation Improvement Act of 1991.
Sec. 8. Bankruptcy code amendments.
Sec. 9. Recordkeeping requirements.
Sec. 10. Exemptions from contemporaneous execution requirement.
Sec. 11. Damage measure.
Sec. 12. SIPC stay.
Sec. 13. Asset-backed securitizations.
Sec. 14. Applicability of other sections to chapter 9.
Sec. 15. Effective date; application of amendments.
Sec. 16. Savings clause.
SEC. 2. TREATMENT OF CERTAIN AGREEMENTS BY CON-
SERVATORS OR RECEIVERS OF INSURED DE-
POSITORY INSTITUTIONS.
(a) DEFINITION
OF QUALIFIED FINANCIAL CON-
TRACT.—Section 11(e)(8)(D) of the Federal Deposit In-
surance Act (12 U.S.C. 1821(e)(8)(D)) is amended—
(1) by striking ‘‘subsection—’’ and inserting
‘‘subsection, the following definitions shall apply:’’;
and
(2) in clause (i), by inserting ‘‘, resolution, or
order’’ after ‘‘any similar agreement that the Cor-
poration determines by regulation’’.
(b) DEFINITION OF SECURITIES CONTRACT.—Sec-
tion 11(e)(8)(D)(ii) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)(8)(D)(ii)) is amended to read as fol-
lows:
‘‘(ii) SECURITIES
CONTRACT.—The
term ‘securities contract’—
‘‘(I) means a contract for the
purchase, sale, or loan of a security, a
certificate of deposit, a mortgage loan,
or any interest in a mortgage loan, a
group or index of securities, certifi-
cates of deposit, or mortgage loans or
interests therein (including any inter-
est therein or based on the value
thereof) or any option on any of the
foregoing, including any option to
purchase or sell any such security,
certificate of deposit, mortgage loan,
interest, group or index, or option,
and including any repurchase or re-
verse repurchase transaction on any
such security, certificate of deposit,
mortgage loan, interest, group or
index, or option;
‘‘(II) does not include any pur-
chase, sale, or repurchase obligation
under a participation in a commercial
mortgage loan unless the Corporation
determines by regulation, resolution,
or order to include any such agree-
ment within the meaning of such
term;
‘‘(III) means any option entered
into on a national securities exchange
relating to foreign currencies;
‘‘(IV) means the guarantee by or
to any securities clearing agency of
any settlement of cash, securities, cer-
tificates of deposit, mortgage loans or
interests therein, group or index of se-
curities, certificates of deposit, or
mortgage loans or interests therein
(including any interest therein or
based on the value thereof) or option
on any of the foregoing, including any
option to purchase or sell any such se-
curity, certificate of deposit, mortgage
loan, interest, group or index, or op-
tion;
‘‘(V) means any margin loan;
‘‘(VI) means any other agree-
ment or transaction that is similar to
any agreement or transaction referred
to in this clause;
enhancement related to any agree-
ment or transaction referred to in this
clause, including any guarantee or re-
imbursement obligation in connection
with any agreement or transaction re-
ferred to in this clause.’’.
(c) DEFINITION OF COMMODITY CONTRACT.—Sec-
tion 11(e)(8)(D)(iii) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)(8)(D)(iii)) is amended to read as fol-
lows:
‘‘(iii) COMMODITY
CONTRACT.—The
term ‘commodity contract’ means—
‘‘(I) with respect to a futures
commission merchant, a contract for
the purchase or sale of a commodity
for future delivery on, or subject to
the rules of, a contract market or
board of trade;
‘‘(II) with respect to a foreign fu-
tures commission merchant, a foreign
future;
‘‘(III) with respect to a leverage
transaction 
merchant, 
a 
leverage
transaction;
‘‘(IV) with respect to a clearing
organization, a contract for the pur-
chase or sale of a commodity for fu-
ture delivery on, or subject to the
rules of, a contract market or board
of trade that is cleared by such clear-
ing organization, or commodity option
traded on, or subject to the rules of,
a contract market or board of trade
that is cleared by such clearing orga-
nization;
‘‘(V) with respect to a commodity
options dealer, a commodity option;
‘‘(VI) any other agreement or
transaction that is similar to any
agreement or transaction referred to
in this clause;
‘‘(VII) any combination of the
agreements or transactions referred to
in this clause;
‘‘(VIII) any option to enter into
any agreement or transaction referred
to in this clause;
‘‘(IX) a master agreement that
provides for an agreement or trans-
action referred to in subclause (I),
(II), (III), (IV), (V), (VI), (VII), or
(VIII), together with all supplements
to any such master agreement, with-
out regard to whether the master
agreement provides for an agreement
or transaction that is not a com-
modity contract under this clause, ex-
cept that the master agreement shall
be considered to be a commodity con-
tract under this clause only with re-
spect to each agreement or trans-
action under the master agreement
that is referred to in subclause (I),
(II), (III), (IV), (V), (VI), (VII), or
(VIII); or
‘‘(X) any security agreement or
arrangement or other credit enhance-
ment related to any agreement or
transaction referred to in this clause,
including any guarantee or reimburse-
ment obligation in connection with
any agreement or transaction referred
to in this clause.’’.
(d) DEFINITION OF FORWARD CONTRACT.—Section
11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(iv)) is amended to read as follows:
‘‘(iv) 
FORWARD
CONTRACT.—The
term ‘forward contract’ means—
‘‘(I) a contract (other than a
commodity contract) for the purchase,
sale, or transfer of a commodity or
any similar good, article, service,
right, or interest which is presently or
in the future becomes the subject of
dealing in the forward contract trade,
or product or byproduct thereof, with
a maturity date more than 2 days
after the date the contract is entered
into, including, a repurchase trans-
action, reverse repurchase transaction,
consignment, 
lease, 
swap, 
hedge
transaction, deposit, loan, option, allo-
cated transaction, unallocated trans-
action, or any other similar agree-
ment;
‘‘(II) any combination of agree-
ments or transactions referred to in
subclauses (I) and (III);
‘‘(III) any option to enter into
any agreement or transaction referred
to in subclause (I) or (II);
‘‘(IV) a master agreement that
provides for an agreement or trans-
action referred to in subclauses (I),
(II), or (III), together with all supple-
ments to any such master agreement,
without regard to whether the master
agreement provides for an agreement
or transaction that is not a forward
contract under this clause, except that
the master agreement shall be consid-
ered to be a forward contract under
this clause only with respect to each
agreement or transaction under the
master agreement that is referred to
in subclause (I), (II), or (III); or
‘‘(V) any security agreement or
arrangement or other credit enhance-
ment related to any agreement or
transaction referred to in subclause
(I), (II), (III), or (IV), including any
guarantee or reimbursement obliga-
tion in connection with any agreement
cates of deposit, eligible bankers’ ac-
ceptances, securities, mortgage loans,
or interests with a simultaneous
agreement by such transferee to
transfer to the transferor thereof cer-
tificates of deposit, eligible bankers’
acceptances, 
securities, 
mortgage
loans, or interests as described above,
at a date certain not later than 1 year
after such transfers or on demand,
against the transfer of funds, or any
other similar agreement;
‘‘(II) does not include any repur-
chase obligation under a participation
in a commercial mortgage loan unless
the Corporation determines by regula-
tion, resolution, or order to include
any such participation within the
meaning of such term;
‘‘(III) means any combination of
agreements or transactions referred to
in subclauses (I) and (IV);
‘‘(IV) means any option to enter
into any agreement or transaction re-
ferred to in subclause (I) or (III);
‘‘(V) means a master agreement
that provides for an agreement or
transaction referred to in subclause
(I), (III), or (IV), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
repurchase 
agreement 
under 
this
clause, except that the master agree-
ment shall be considered to be a re-
purchase agreement under this sub-
clause only with respect to each agree-
ment or transaction under the master
agreement that is referred to in sub-
clause (I), (III), or (IV); and
‘‘(VI) means any security agree-
ment or arrangement or other credit
enhancement related to any agree-
ment or transaction referred to in
subclause (I), (III), (IV), or (V), in-
cluding any guarantee or reimburse-
ment obligation in connection with
any agreement or transaction referred
to in any such subclause.
For purposes of this clause, the term
‘qualified foreign government security’
means a security that is a direct obligation
of, or that is fully guaranteed by, the cen-
tral government of a member of the Orga-
nization for Economic Cooperation and
Development (as determined by regulation
or order adopted by the appropriate Fed-
eral banking authority).’’.
(f) DEFINITION
OF SWAP AGREEMENT.—Section
11(e)(8)(D)(vi) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(vi)) is amended to read as follows:
‘‘(vi) SWAP AGREEMENT.—The term
‘swap agreement’ means—
‘‘(I) any agreement, including the
terms and conditions incorporated by
reference in any such agreement,
which is an interest rate swap, option,
future, or forward agreement, includ-
ing a rate floor, rate cap, rate collar,
cross-currency rate swap, and basis
swap; a spot, same day-tomorrow, to-
morrow-next, forward, or other for-
eign exchange or precious metals
agreement; a currency swap, option,
future, or forward agreement; an eq-
uity index or equity swap, option, fu-
ture, or forward agreement; a debt
index or debt swap, option, future, or
forward agreement; a total return,
credit spread or credit swap, option,
future, or forward agreement; a com-
modity index or commodity swap, op-
tion, future, or forward agreement; or
a weather swap, weather derivative, or
weather option;
‘‘(II) any agreement or trans-
action that is similar to any other
agreement or transaction referred to
in this clause and that is of a type
that has been, is presently, or in the
future becomes, the subject of recur-
rent dealings in the swap markets (in-
cluding terms and conditions incor-
porated by reference in such agree-
ment) and that is a forward, swap, fu-
ture, or option on one or more rates,
currencies, commodities, equity securi-
ties or other equity instruments, debt
securities or other debt instruments,
quantitative measures associated with
an occurrence, extent of an occur-
rence, or contingency associated with
a financial, commercial, or economic
consequence, or economic or financial
indices or measures of economic or fi-
nancial risk or value;
‘‘(III) any combination of agree-
ments or transactions referred to in
this clause;
‘‘(IV) any option to enter into
any agreement or transaction referred
to in this clause;
‘‘(V) a master agreement that
provides for an agreement or trans-
action referred to in subclause (I),
(II), (III), or (IV), together with all
supplements to any such master
agreement, without regard to whether
the master agreement contains an
agreement or transaction that is not a
swap agreement under this clause, ex-
cept that the master agreement shall
be considered to be a swap agreement
under this clause only with respect to
each agreement or transaction under
the master agreement that is referred
to in subclause (I), (II), (III), or (IV);
and
‘‘(VI) any security agreement or
arrangement or other credit enhance-
ment related to any agreements or
transactions referred to in subclause
(I), (II), (III), (IV), or (V), including
any guarantee or reimbursement obli-
gation in connection with any agree-
ment or transaction referred to in any
such subclause.
Such term is applicable for purposes of
this subsection only and shall not be con-
strued or applied so as to challenge or af-
fect the characterization, definition, or
treatment of any swap agreement under
any other statute, regulation, or rule, in-
cluding the Securities Act of 1933, the Se-
curities Exchange Act of 1934, the Public
Utility Holding Company Act of 1935, the
Trust Indenture Act of 1939, the Invest-
ment Company Act of 1940, the Invest-
ment Advisers Act of 1940, the Securities
Investor Protection Act of 1970, the Com-
modity Exchange Act, the Gramm-Leach-
Bliley Act, and the Legal Certainty for
Bank Products Act of 2000.’’.
(g) 
DEFINITION
OF
TRANSFER.—Section
11(e)(8)(D)(viii) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(viii)) is amended to read as follows:
‘‘(viii) TRANSFER.—The term ‘trans-
fer’ means every mode, direct or indirect,
absolute or conditional, voluntary or invol-
untary, of disposing of or parting with
property or with an interest in property,
including retention of title as a security in-
terest and foreclosure of the depository in-
stitution’s equity of redemption.’’.
(h) TREATMENT
OF QUALIFIED FINANCIAL CON-
TRACTS.—Section 11(e)(8) of the Federal Deposit Insur-
ance Act (12 U.S.C. 1821(e)(8)) is amended—
(1) in subparagraph (A)—
(A) by striking ‘‘paragraph (10)’’ and in-
serting ‘‘paragraphs (9) and (10)’’;
(B) in clause (i), by striking ‘‘to cause the
termination or liquidation’’ and inserting ‘‘such
person has to cause the termination, liquida-
tion, or acceleration’’; and
(C) by striking clause (ii) and inserting the
following:
‘‘(ii) any right under any security
agreement or arrangement or other credit
enhancement related to one or more quali-
fied financial contracts described in clause
(i);’’; and
(2) in subparagraph (E), by striking clause (ii)
and inserting the following:
‘‘(ii) any right under any security
agreement or arrangement or other credit
enhancement related to one or more quali-
fied financial contracts described in clause
(i);’’.
(i) 
AVOIDANCE
OF
TRANSFERS.—Section
11(e)(8)(C)(i) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(C)(i)) is amended by inserting ‘‘section
5242 of the Revised Statutes of the United States or any
other Federal or State law relating to the avoidance of
preferential or fraudulent transfers,’’ before ‘‘the Corpora-
tion’’.
SEC. 3. AUTHORITY OF THE CORPORATION WITH RESPECT
TO FAILED AND FAILING INSTITUTIONS.
(a) IN GENERAL.—Section 11(e)(8) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is
amended—
(1) in subparagraph (E), by striking ‘‘other
than paragraph (12) of this subsection, subsection
(d)(9)’’ and inserting ‘‘other than subsections (d)(9)
and (e)(10)’’; and
(2) by adding at the end the following new sub-
paragraphs:
‘‘(F) CLARIFICATION.—No provision of law
shall be construed as limiting the right or
power of the Corporation, or authorizing any
court or agency to limit or delay, in any man-
ner, the right or power of the Corporation to
transfer any qualified financial contract in ac-
cordance with paragraphs (9) and (10) of this
subsection or to disaffirm or repudiate any such
contract in accordance with subsection (e)(1) of
this section.
‘‘(G) WALKAWAY
CLAUSES
NOT
EFFEC-
TIVE.—
‘‘(i) IN
GENERAL.—Notwithstanding
the provisions of subparagraphs (A) and
(E), and sections 403 and 404 of the Fed-
eral Deposit Insurance Corporation Im-
provement Act of 1991, no walkaway
clause shall be enforceable in a qualified fi-
nancial contract of an insured depository
institution in default.
‘‘(ii) WALKAWAY CLAUSE DEFINED.—
For purposes of this subparagraph, the
term ‘walkaway clause’ means a provision
in a qualified financial contract that, after
calculation of a value of a party’s position
or an amount due to or from 1 of the par-
ties in accordance with its terms upon ter-
mination, liquidation, or acceleration of the
qualified financial contract, either does not
create a payment obligation of a party or
extinguishes a payment obligation of a
party in whole or in part solely because of
such party’s status as a nondefaulting
party.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—
Section 11(e)(12)(A) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(12)(A)) is amended by inserting
‘‘or the exercise of rights or powers by’’ after ‘‘the ap-
pointment of’’.