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 re-
ferred 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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘GSE Legal Fee Reduc-
tion Act of 2011’’. 
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SEC. 2. LIMITATIONS ON INDEMNIFICATION OF LEGAL 
FEES. 
(a) LIMITATIONS.—Section 1318 of the Federal 
Housing Enterprises Financial Safety and Soundness Act 
of 1992 (12 U.S.C. 4518) is amended by adding at the 
end the following new subsection: 
‘‘(f) PROCEDURES FOR ADVANCEMENT AND INDEM-
NIFICATION OF LEGAL FEES.—The Director shall, by reg-
ulation, establish requirements prescribing the procedures 
and terms for advancement of amounts by an enterprise 
for qualified indemnification payments for the benefit of 
any entity-affiliated party, which shall provide as follows: 
‘‘(1) DETERMINATION
OF
REASONABLE
EX-
PENSES.— 
‘‘(A) PROPOSED CRITERIA.—If at any time 
an enterprise is required, pursuant to law, regu-
lation, order, bylaw, or agreement or contract, 
to make a qualified indemnification payment for 
the benefit of an entity-affiliated party, the Di-
rector shall require the enterprise to submit to 
the Director proposed criteria to be used in de-
termining, at the time for the advancement of 
amounts for such payment, whether the liability 
or legal expenses for which such payment is to 
be made is reasonable, which shall include— 
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‘‘(i) methods and procedures for mak-
ing such determinations; 
‘‘(ii) a process for review and appeal 
of such determinations; and 
‘‘(iii) terms and conditions for advanc-
ing amounts for liability or legal expenses 
determined to be reasonable. 
‘‘(B) REVIEW.—Upon receipt of proposed 
criteria submitted pursuant to subparagraph 
(A), the Director shall promptly review such 
proposed criteria and approve or disapprove 
such criteria based on a determination of 
whether such criteria will ensure that amounts 
are advanced only for qualified indemnification 
payments for liability or legal expenses that are 
reasonable. 
‘‘(2) CLAIMS OF FRAUD, MORAL TURPITUDE, 
AND BREACH OF FIDUCIARY DUTY.— 
‘‘(A) BYLAWS.—The Director shall require 
each enterprise to adopt bylaws requiring any 
entity-affiliated party accused in any claim, pro-
ceeding, or action, whether administrative, civil, 
or criminal of fraud, moral turpitude, or breach 
of fiduciary duty to post collateral, security, 
bonding, or other assurances of repayment. 
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‘‘(B) REQUIREMENT TO POST BOND.—The 
Director shall require any entity-affiliated party 
accused in any claim, proceeding, or action, 
whether administrative, civil, or criminal, of 
fraud, moral turpitude, or breach of fiduciary 
duty to post collateral, security, bonding, or 
other assurances of repayment. 
‘‘(3) PROHIBITION OF USE OF AMOUNTS BOR-
ROWED
FROM
TAXPAYERS
FOR
SETTLEMENT 
COSTS.— 
‘‘(A) PROHIBITION.—The Director shall 
prohibit an enterprise from using any Treasury 
funds to satisfy any settlement, judgment, 
order, or penalty. 
‘‘(B) TREASURY FUNDS.—For purposes of 
subparagraph (A), the term ‘Treasury funds’ 
means amounts obtained by an enterprise pur-
suant to— 
‘‘(i) purchase by the Secretary of the 
Treasury of obligations or securities of the 
enterprise pursuant to— 
‘‘(I) subsection (c) or (g) of sec-
tion 304 of the Federal National 
Mortgage Association Charter Act (12 
U.S.C. 1719); 
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‘‘(II) subsection (c) or (l) of sec-
tion 306 of the Federal Home Loan 
Mortgage Corporation Act (12 U.S.C. 
1455); or 
‘‘(III) subsection (i) or (l) of sec-
tion 11 of the Federal Home Loan 
Bank Act (12 U.S.C. 1431); or 
‘‘(ii) any other lending, advance, sub-
sidy, payment, appropriation, or purchase 
of any obligation or security, by the Fed-
eral Government or any agency or entity of 
the Federal Government. 
‘‘(C) ASSETS TO BE USED FOR SETTLE-
MENT COSTS.—An enterprise shall satisfy any 
settlement, judgment, order, or penalty, to the 
maximum extent possible, with proceeds from 
the sale of assets of the enterprise, including 
assets in the retained portfolio of the enterprise 
and real estate owned of the enterprise and 
other physical assets of the enterprise. 
‘‘(4) NOTIFICATION OF SETTLEMENT.—The Di-
rector shall prohibit an enterprise from entering into 
any consent decree or settlement of any claim, pro-
ceeding, or action involving an entity-affiliated party 
that will result in any qualified indemnification pay-
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ments in an aggregate amount exceeding $1,000,000 
before the expiration of the 30-day period beginning 
upon the submission by the Director to the Com-
mittee on Financial Services of the House of Rep-
resentatives and the Committee on Banking, Hous-
ing, and Urban Affairs of the Senate of notification 
of such proposed consent decree or settlement and 
the terms and amount of the qualified indemnifica-
tion payments involved. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section, the following definitions shall apply: 
‘‘(A) QUALIFIED
INDEMNIFICATION
PAY-
MENT.—The term ‘qualified indemnification 
payment’ means any payment (or agreement to 
make any payment) by an enterprise for the 
benefit of any person who is or was an entity- 
affiliated party, to pay or reimburse such per-
son for any liability or legal expense with re-
gard to any claim, proceeding, or action, wheth-
er administrative, civil, or criminal. 
‘‘(B) OTHER DEFINITIONS.—The terms ‘li-
ability or legal expense’ and ‘payment’ have the 
meanings given such terms in subsection 
(e)(5).’’. 
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