To instruct the Inspector General of the Federal Deposit Insurance Corporation to study the impact of insured depository institution failures, and for other purposes.
PL 112-88 (H.R.2056), enacted 01/03/2012

125 STAT. 1899 
PUBLIC LAW 112–88—JAN. 3, 2012 
Public Law 112–88 
112th Congress 
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 Representatives of 
the United States of America in Congress assembled, 
SECTION 1. INSPECTOR GENERAL STUDY. 
(a) STUDY.—The Inspector General of the Federal Deposit Insur-
ance Corporation (FDIC) shall conduct a comprehensive study on 
the impact of the failure of insured 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)); and 
(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 Holding Company Act of 1956 
(12 U.S.C. 1851(h)(2)). 
(c) MATTERS TO BE STUDIED.—In conducting the study under 
this section, the Inspector General shall address the following: 
(1) LOSS-SHARING AGREEMENTS.—The effect of loss-sharing 
agreements (LSAs), including— 
(A) the impact of loss-sharing on the insured depository 
institutions that survive and 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 commer-
cial (including land development and 1- to 4-family 
residential and commercial construction loans), resi-
dential, or small business loans) could be modified 
with fewer LSAs, or if LSAs could be phased out 
altogether; 
(iii) the FDIC’s policies and procedures for moni-
toring LSAs, including those designed to ensure institu-
tions are not imprudently selling assets at a depressed 
value; 
(iv) the impact on the availability of credit; and 
(v) the impact on loans with participation agree-
ments outstanding with other insured depository 
institutions; 
(B) the FDIC’s policies and procedures for terminating 
LSAs and mitigating the risk of acquiring institutions 
having substantial assets remaining in their portfolio when 
the LSAs are due to expire; 
Jan. 3, 2012 
[H.R. 2056] 
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125 STAT. 1900 
PUBLIC LAW 112–88—JAN. 3, 2012 
(C) the extent to which LSAs provide incentives for 
loan modifications and other means of increasing the prob-
ability of commercial assets 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 Depositors Insurance Fund. 
(2) LOSSES.—The significance of losses, including— 
(A) the number of insured depository institutions that 
have been placed into receivership or conservatorship due 
to significant losses arising from loans for which all pay-
ments of principal, interest, and fees were current, 
according to the contractual terms of the loans; 
(B) the impact of significant losses arising from loans 
for which all payments of principal, interest, and fees were 
current, according to the contractual terms of the loans, 
on the ability of insured depository institutions to raise 
additional capital; 
(C) the effect of changes in the application of fair 
value accounting rules and other accounting standards, 
including the allowance for loan and lease loss methodology, 
on insured depository institutions, specifically the degree 
to which fair value accounting rules and other accounting 
standards have led to regulatory action against banks, 
including consent orders and closure of the institution; 
and 
(D) whether field examiners are using appropriate 
appraisal procedures with respect to losses arising from 
loans for which all payments of principal, interest, and 
fees were current, according to the contractual terms of 
the loans, and whether the application of appraisals leads 
to immediate write downs on the value of the underlying 
asset. 
(3) APPRAISALS.— 
(A) The number of insured depository institutions 
placed into receivership or conservatorship due to asset 
write-downs and the policies and procedures for evaluating 
the adequacy of an insured depository institution’s allow-
ance for loan and lease losses. 
(B) The policies and procedures examiners use for 
evaluating the appraised values of property securing real 
estate loans and the extent to which those policies and 
procedures are followed. 
(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 assess the ade-
quacy of capital at insured depository institutions, 
including the extent to which the quality and risk profile 
of the insured institution’s loan portfolio is considered in 
the examiners’ assessment. 
(B) The number of applications received by the FDIC 
from private capital investors to acquire insured depository 
institutions in receivership, the factors used by the FDIC 
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125 STAT. 1901 
PUBLIC LAW 112–88—JAN. 3, 2012 
in evaluating the applications, and the number of applica-
tions that have been approved or not approved, including 
the reasons pertaining thereto. 
(C) The policies and procedures associated with the 
evaluation of potential private investments in insured 
depository institutions and the extent to which those poli-
cies and procedures are followed. 
(5) WORKOUTS.—The success of FDIC field examiners in 
implementing FDIC guidelines titled ‘‘Policy Statement on Pru-
dent Commercial Real Estate 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 implementation 
between residential workouts and commercial (including 
land development and 1- to 4-family residential and 
commercial construction loans) workouts. 
(6) ORDERS.—The application and impact of consent orders 
and cease and desist orders, including— 
(A) whether such orders have been applied uniformly 
and fairly across all insured depository institutions; 
(B) the reasons for failing to apply such orders uni-
formly and fairly when such failure occurs; 
(C) the impact of such orders on the ability of insured 
depository institutions to raise capital; 
(D) the impact of such orders on the ability 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— 
(A) the impact of FDIC policies on the investment 
in insured depository institutions, especially in States 
where more than 10 such institutions have failed since 
2008; 
(B) whether the FDIC fairly and consistently applies 
capital standards when an insured depository institution 
is successful in raising private capital; and 
(C) whether the FDIC steers potential investors away 
from insured depository institutions 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, including— 
(A) the number of insured depository institutions that 
have been approved to receive private equity investment 
by the FDIC; 
(B) the number of insured depository institutions that 
have been rejected from receiving private equity investment 
by the FDIC; and 
(C) the reasons for rejection of private equity invest-
ment when such rejection occurs. 
(d) REPORT.—Not later than 1 year after the date of the enact-
ment of this Act, the Inspector General shall submit to Congress 
a report— 
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125 STAT. 1902 
PUBLIC LAW 112–88—JAN. 3, 2012 
LEGISLATIVE HISTORY—H.R. 2056: 
HOUSE REPORTS: No. 112–182 (Comm. on Financial Services). 
CONGRESSIONAL RECORD, Vol. 157 (2011): 
July 26, 28, considered and passed House. 
Nov. 17, considered and passed Senate, amended. 
Dec. 19, 20, House considered and concurred in Senate amendments. 
(1) on the results of the study conducted pursuant to this 
section; and 
(2) any recommendations based on such study. 
(e) COORDINATION BETWEEN FDIC IG, TREASURY IG, AND FED-
ERAL RESERVE IG.—In carrying out this section, the Inspector Gen-
eral of the FDIC shall consult with the Inspectors General of 
the Treasury and of the Federal Reserve System, and such Inspec-
tors 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. CONGRESSIONAL TESTIMONY. 
The Inspector General of the Federal Deposit Insurance Cor-
poration and the Comptroller General of the United States shall 
appear before the Committee on Banking, Housing, and Urban 
Affairs of the Senate and the Committee on Financial Services 
of the House of Representatives, not later than 150 days after 
the date of publication of the study required under this Act to 
discuss the outcomes and impact of Federal regulations on bank 
examinations and failures. 
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. 
(2) The procyclical impact of fair value accounting stand-
ards. 
(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 agree-
ments. 
(b) REPORT.—Not later than the end of the 1-year period begin-
ning on the date of the enactment of this Act, the Comptroller 
General shall issue a report to the Congress on the study carried 
out pursuant to subsection (a). 
Approved January 3, 2012. 
Deadline. 
Consultation. 
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