IIB 
112TH CONGRESS 
1ST SESSION H. R. 2056 
IN THE SENATE OF THE UNITED STATES 
JULY 29, 2011 
Received; read twice and referred to the Committee on Banking, Housing, and 
Urban Affairs 
AN ACT 
To instruct the Inspector General of the Federal Deposit 
Insurance Corporation to study the impact of insured 
depository institution failures, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. INSPECTOR GENERAL STUDY. 
(a) STUDY.—The Inspector General of the Federal 
Deposit Insurance Corporation (FDIC) shall conduct a 
comprehensive study on the impact of the failure of in-
sured depository institutions. 
(b) DEFINITIONS.—For purposes of this Act— 
(1) the term ‘‘insured depository institution’’ 
has the meaning given such term in section 3(c) of 
the Federal Deposit Insurance Act (12 U.S.C. 
1813(c)); 
(2) the term ‘‘private equity company’’ has the 
meaning given the terms ‘‘hedge fund’’ and ‘‘private 
equity fund’’ in section 13(h)(2) of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1851(h)(2)); 
and 
(3) the term ‘‘paper-loss’’ means any write 
down on a performing asset held by an insured de-
pository institution that causes such institution to 
raise more capital in order to cover the write down. 
(c) MATTERS TO BE STUDIED.—In conducting the 
study under this section, the Inspector General shall ad-
dress the following: 
(1) LOSS-SHARING
AGREEMENTS.—The effect 
of loss-sharing agreements (LSAs), including— 
(A) the impact of loss-sharing on the in-
sured depository institutions that survive and 
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the borrowers of insured depository institutions 
that fail, including— 
(i) the impact on the rate of loan 
modifications and adjustments; 
(ii) whether more types of loans (such 
as commercial (including land development 
and 1- to 4-family residential and commer-
cial construction loans), residential, or 
small business loans) could be modified 
with fewer LSAs, or if LSAs could be 
phased out altogether; 
(iii) the FDIC’s policies and proce-
dures for monitoring LSAs, including those 
designed to ensure institutions are not im-
prudently selling assets at a depressed 
value; 
(iv) the impact on the availability of 
credit; and 
(v) the impact on loans with participa-
tion agreements outstanding with other in-
sured depository institutions; 
(B) the FDIC’s policies and procedures for 
terminating LSAs and mitigating the risk of ac-
quiring institutions having substantial assets 
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remaining in their portfolio when the LSAs are 
due to expire; 
(C) the extent to which LSAs provide in-
centives for loan modifications and other means 
of increasing the probability of commercial as-
sets being considered ‘‘performing’’; 
(D) the nature and extent of differences 
for modifying residential assets and working 
out commercial real estate under LSAs; and 
(E) methods of ensuring the orderly end of 
expiring LSAs to prevent any adverse impact 
on borrowing, real estate industry and the De-
positors Insurance Fund. 
(2) PAPER LOSSES.—The significance of paper 
losses, including— 
(A) the number of insured depository insti-
tutions that have been placed into receivership 
or conservatorship due to paper losses; 
(B) the impact on paper losses of raising 
more capital; 
(C) the effect of changes in the application 
of the fair value of real estate accounting rules 
and other accounting standards; 
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(D) whether field examiners are using 
proper appraisal procedures with respect to 
paper losses; and 
(E) methods of stopping the vicious down-
ward spiral of losses and write downs. 
(3) APPRAISALS.— 
(A) The number of insured depository in-
stitutions placed into receivership or con-
servatorship due to asset write-downs and the 
policies and procedures for evaluating the ade-
quacy of an insured depository institution’s al-
lowance for loan and lease losses. 
(B) The policies and procedures examiners 
use for evaluating the appraised values of prop-
erty securing real estate loans and the extent to 
which those policies and procedures are fol-
lowed. 
(C) FDIC field examiner implementation 
of guidance issued December 2, 2010, titled 
‘‘Agencies Issue Final Appraisal and Evaluation 
Guidelines’’. 
(4) CAPITAL.— 
(A) The factors that examiners use to as-
sess the adequacy of capital at insured deposi-
tory institutions, including the extent to which 
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the quality and risk profile of the insured insti-
tution’s loan portfolio is considered in the ex-
aminers’ assessment. 
(B) The number of applications received by 
the FDIC from private capital investors to ac-
quire insured depository institutions in receiver-
ship, the factors used by the FDIC in evalu-
ating the applications, and the number of appli-
cations that have been approved or not ap-
proved, including the reasons pertaining there-
to. 
(C) The policies and procedures associated 
with the evaluation of potential private invest-
ments in insured depository institutions and the 
extent to which those policies and procedures 
are followed. 
(5) WORKOUTS.—The success of FDIC field ex-
aminers in implementing FDIC guidelines titled 
‘‘Policy Statement on Prudent Commercial Real Es-
tate Loan Workouts’’ (October 31, 2009) regarding 
workouts of commercial real estate, including— 
(A) whether field examiners are using the 
correct appraisals; and 
(B) whether there is any difference in im-
plementation between residential workouts and 
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commercial (including land development and 1- 
to 4-family residential and commercial construc-
tion loans) workouts. 
(6) ORDERS.—The application and impact of 
consent orders and cease and desist orders, includ-
ing— 
(A) whether such orders have been applied 
uniformly and fairly across all insured deposi-
tory institutions; 
(B) the reasons for failing to apply such 
orders uniformly and fairly when such failure 
occurs; 
(C) the impact of such orders on the abil-
ity of insured depository institutions to raise 
capital; 
(D) the impact of such orders on the abil-
ity of insured depository institutions to extend 
or modify credit to existing and new borrowers; 
and 
(E) whether individual insured depository 
institutions have improved enough to have such 
orders removed. 
(7) FDIC POLICY.—The application and impact 
of FDIC policies, including— 
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(A) the impact of FDIC policies on the in-
vestment in insured depository institutions, es-
pecially in States where more than 10 such in-
stitutions have failed since 2008; 
(B) whether the FDIC fairly and consist-
ently applies capital standards when an insured 
depository institution is successful in raising 
private capital; and 
(C) whether the FDIC steers potential in-
vestors away from insured depository institu-
tions that may be in danger of being placed in 
receivership or conservatorship. 
(8) PRIVATE EQUITY COMPANIES.—The FDIC’s 
handling of potential investment from private equity 
companies in insured depository institutions, includ-
ing— 
(A) the number of insured depository insti-
tutions that have been approved to receive pri-
vate equity investment by the FDIC; 
(B) the number of insured depository insti-
tutions that have been rejected from receiving 
private equity investment by the FDIC; and 
(C) the reasons for rejection of private eq-
uity investment when such rejection occurs. 
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(d) REPORT.—Not later than 1 year after the date 
of the enactment of this Act, the Inspector General shall 
submit to Congress a report— 
(1) on the results of the study conducted pursu-
ant to this section; and 
(2) any recommendations based on such study. 
(e) COORDINATION BETWEEN FDIC IG, TREASURY 
IG, AND FEDERAL RESERVE IG.—In carrying out this 
section, the Inspector General of the FDIC shall consult 
with the Inspectors General of the Treasury and of the 
Federal Reserve System, and such Inspectors General 
shall provide any documents or other material requested 
by the Inspector General of the FDIC in order to carry 
out this section. 
SEC. 2. FUNDING. 
The FDIC shall make available from the portion of 
the FDIC budget allocated to management expenses, sums 
allowing the FDIC Inspector General to complete this 
study. 
SEC. 3. GAO STUDY. 
(a) STUDY.—The Comptroller General of the United 
States shall carry out a study on the following: 
(1) The causes of high levels of bank failures in 
States with 10 or more failures since 2008. 
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(2) The procyclical impact of fair value ac-
counting standards. 
(3) The causes and potential solutions for the 
‘‘vicious cycle’’ of loan write downs, raising capital, 
and failures. 
(4) An analysis of the community impact of 
bank failures. 
(5) The feasibility and overall impact of loss 
share agreements. 
(b) REPORT.—Not later than the end of the 1-year 
period beginning on the date of the enactment of this Act, 
the Comptroller General shall issue a report to the Con-
gress on the study carried out pursuant to subsection (a). 
Passed the House of Representatives July 28, 2011. 
Attest: 
KAREN L. HAAS, 
Clerk. 
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