II
111th CONGRESS
1st Session
S. 1540
IN THE SENATE OF THE UNITED STATES
July 30, 2009
Mr. Corker (for himself and Mr. Warner) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs
A BILL
To provide for enhanced authority of the Federal Deposit Insurance Corporation to act as receiver for certain affiliates of depository institutions, and for other purposes.
Short title
This Act may be cited as
the Resolution Reform Act of
2009
.
Purposes
The purposes of this Act are—
to allow the
Federal Deposit Insurance Corporation (in this Act referred to as the
Corporation
) to resolve the holding companies, affiliates, and
subsidiaries of failed or failing insured depository institutions, consistent
with the statutory mission of the Corporation, recognizing that depository
institution holding companies serve as a source of strength for their
subsidiary institutions, and that their affiliates and subsidiaries may provide
critical services for such institutions; and
to provide a clear and cohesive set of rules to address the increasingly complex and interreliant business structures in which insured depository institutions operate in order to promote efficient and economical resolution.
Definitions
For purposes of this Act, the following definitions shall apply:
Affiliate
The term affiliate has the same meaning as in section 2(k) of the Bank Holding Company Act of 1956.
Bridge depository institution holding company
The term bridge depository institution holding company means a new depository institution holding company organized by the Corporation pursuant to section 53(b) of the Federal Deposit Insurance Act.
Corporation
The terms Corporation and Board mean the Federal Deposit Insurance Corporation and the Board of Directors thereof, respectively.
Covered affiliate or subsidiary
The term covered affiliate or subsidiary means any affiliate or subsidiary of a depository institution holding company, or any subsidiary of an insured depository institution that is a subsidiary of that depository institution holding company, as to which the Corporation is appointed receiver.
Covered depository institution holding company
The term covered depository institution holding company means a depository institution holding company with one or more affiliated or subsidiary insured depository institutions for which grounds exist to appoint a receiver pursuant to section 11(c) of the Federal Deposit Insurance Act.
Foreign
The term foreign means any country other than the United States and includes any territory, dependency, or possession of any country other than the United States.
Insured depository institution
The term insured depository institution has the same meaning as section 3(c)(2) of the Federal Deposit Insurance Act.
Holding company resolution amendments to the Federal Deposit Insurance Act
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by adding at the end the following:
Resolution of covered depository institution holding companies, affiliates, and subsidiaries
In general
Notwithstanding any other provision of Federal or State law, except section 52(c), it shall be the responsibility of the Corporation to resolve depository institution holding companies of failed or failing insured depository institutions and the affiliates and subsidiaries of a depository institution holding company, including any subsidiary of an insured depository institution that is a subsidiary of the depository institution holding company, using the powers and authorities conferred upon it by this Act.
Definitions
For purposes of this section and sections 52 and 53, the following definitions shall apply:
Bridge depository institution holding company
The term bridge depository institution holding company means a new depository institution holding company organized by the Corporation pursuant to section 53(b).
Covered affiliate or subsidiary
The term covered affiliate or subsidiary means any affiliate or subsidiary of a depository institution holding company, or any subsidiary of an insured depository institution that is a subsidiary of that depository institution holding company, as to which the Corporation is appointed receiver under section 52.
Covered depository institution holding company
The term covered depository institution holding company means a depository institution holding company with one or more affiliated or subsidiary insured depository institutions for which grounds exist to appoint a receiver pursuant to section 11(c).
Functionally regulated affiliate or subsidiary
The term functionally regulated affiliate or subsidiary means any company—
that is not a depository institution holding company or a depository institution; and
that is—
a broker or dealer that is registered under the Securities Exchange Act of 1934;
a registered investment adviser, properly registered by or on behalf of either the Securities and Exchange Commission in accordance with the Investment Advisers Act of 1940, or any State, with respect to the investment advisory activities of such investment adviser and activities incidental to such investment advisory activities;
an investment company that is registered under the Investment Company Act of 1940;
an insurance company that is subject to supervision by a State insurance regulator, with respect to the insurance activities of the insurance company and activities incidental to such insurance activities; or
an entity that is subject to regulation by the Commodity Futures Trading Commission, with respect to the commodities activities of such entity and activities incidental to such commodities activities.
Functional regulator
The term functional regulator means the
Federal or State regulator responsible for regulating the types of activities
engaged in by the depository institution holding company, its subsidiary
institutions, or other affiliates and subsidiaries. The functional
regulators
are—
the Securities and Exchange Commission, if the depository institution holding company, any subsidiary institution, or other affiliate thereof, is a broker or dealer registered with the Commission under section 15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) in conjunction with the authorities granted to the Securities Investor Protection Corporation, as created by the Securities Investor Protection Act in resolution of brokers or dealers;
the Commodity Futures Trading Commission, if the depository institution holding company, its subsidiary institution, or other affiliate thereof, is a futures commission merchant or a commodity pool operator registered with the Commodity Futures Trading Commission under the Commodity Exchange Act; and
a State insurance commission or other board or authority, if the depository institution holding company, or an affiliate or subsidiary thereof, is an insurance company.
Appointment of the Corporation as receiver
Depository institution holding companies
In general
Notwithstanding any other provision of Federal law, the law of any State, or the constitution of any State, and subject to subsection (c), the Corporation shall accept appointment, and shall act as the receiver of a covered depository institution holding company upon such appointment, in the manner provided in paragraph (2) or (3), if the Corporation determines, in its sole discretion, that such appointment will reduce the cost to the Deposit Insurance Fund, and that grounds specified in subsection (f) exist. If the Corporation determines that such appointment will not reduce the cost to the Deposit Insurance Fund, the Corporation may decline the appointment, as provided in subsection (c).
Appointment by the appropriate Federal banking agency
Whenever the appropriate Federal banking agency appoints a receiver for a depository institution holding company, the Federal banking agency shall tender the appointment to the Corporation, and the Corporation shall accept such appointment, unless the Corporation declines the appointment, as provided in subsection (c).
Appointment of the corporation by the corporation
The Board of Directors may appoint the Corporation as receiver of a depository institution holding company, after consultation with the appropriate Federal banking agency, if the Board of Directors determines that, notwithstanding the existence of grounds specified in subsection (f), the appropriate Federal banking agency having supervision of a covered depository institution holding company has declined to appoint the Corporation as receiver.
Functionally regulated depository institution holding companies
When the appropriate Federal banking agency appoints the Corporation as receiver of a covered depository institution holding company, or the Board of Directors appoints the Corporation as receiver of a covered depository institution holding company, the appropriate Federal banking agency or the Corporation shall consult with the covered depository institution holding company's functional regulator, if any.
Affiliates and subsidiaries
In general
Notwithstanding any other provision of Federal law, the law of any State, or the constitution of any State, and subject to paragraph (2) and subsection (c), in any case in which the Corporation is appointed under this section as receiver for a depository institution holding company, the Corporation may appoint itself as the receiver of any affiliate or subsidiary of the insured depository institution or depository institution holding company that is incorporated or organized under the laws of any State, if the Corporation determines that such action would facilitate the orderly resolution of the insured depository institution or depository institution holding company, and is consistent with the purposes of this Act.
Functionally regulated subsidiaries
The Corporation shall consult with the appropriate Federal or State functional regulator when the Corporation appoints itself as the receiver of any functionally regulated affiliate or subsidiary.
Bankruptcy or State insurance resolution option
Bankruptcy grounds for declining appointment
The Corporation may decline to accept appointment for a covered depository institution holding company, when, in its sole discretion, the Corporation determines that the resolution of that holding company would be better accomplished under title 11, of the United States Code, or under applicable State insurance law.
Rulemaking required
The Corporation shall, not later than 180 days after the date of enactment of this section, adopt regulations that establish criteria pursuant to which the Corporation will make the determination described in paragraph (1).
Separate entities
In general
Subject to paragraph (2), each separate legal entity for which the Corporation is appointed receiver shall constitute a separate receivership.
Applicability
Paragraph (1) shall not apply to any insured depository institution subsidiary for which the Corporation has appointed itself as receiver.
Corporation not subject to any other agency
When acting as the receiver pursuant to an appointment described in subsection (a) or (b), the Corporation shall not be subject to the direction or supervision of any other agency or department of the United States or any State in the exercise of its rights, powers, and privileges.
Grounds for appointment
The grounds for appointing the Corporation as receiver of a depository institution holding company, affiliate, or subsidiary are that one or more grounds exist under section 11(c) to appoint a receiver for one or more affiliated insured depository institutions.
Termination and exclusion of other actions
The appointment of the Corporation as receiver for a depository institution holding company or an insured depository institution that is an affiliate or subsidiary of a depository institution holding company shall immediately, and by operation of law, terminate any case commenced with respect to the depository institution holding company or any affiliate or subsidiary under title 11, United States Code, or any proceeding under any State insolvency law with respect to the depository institution holding company or affiliate or subsidiary. No such case or proceeding may be commenced with respect to the depository institution holding company or any affiliate or subsidiary of the insured depository institution at any time while the Corporation acts as receiver of the depository institution holding company or any affiliate or subsidiary, without the written agreement of the Corporation.
Judicial review
In general
If the Corporation is appointed (including the appointment of the Corporation by itself) as receiver of a depository institution holding company under subsection (a), the depository institution holding company may, not later than 30 days thereafter, bring an action in the United States district court for the judicial district in which the home office of such depository institution holding company is located, or in the United States District Court for the District of Columbia, for an order requiring the Corporation to be removed as the receiver (regardless of how such appointment was made), and the court shall, upon the merits, dismiss such action or direct the Corporation to be removed as the receiver.
Other appointment
If the Corporation appoints itself as receiver of any affiliate or subsidiary of the insured depository institution or depository institution holding company under subsection (b), the affiliate or subsidiary of the insured depository institution or depository institution holding company may, not later than 30 days thereafter, bring an action in the United States district court for the judicial district in which the home office of such any affiliate or subsidiary of the insured depository institution or depository institution holding company is located, or in the United States District Court for the District of Columbia, for an order requiring the Corporation to be removed as the receiver, and the court shall, upon the merits, dismiss such action or direct the Corporation to be removed as the receiver.
Powers and duties of Corporation as receiver
Rulemaking authority of Corporation
The Corporation may prescribe such regulations as the Corporation determines appropriate regarding the orderly resolution and conduct of receiverships of covered depository institution holding companies or any affiliate or subsidiary, in accordance with section 52.
Receivership, back-Up examination, and enforcement powers
Except as provided in subsections (c) and (e), the Corporation shall have the same powers and rights to carry out its duties with respect to depository institution holding companies, or affiliates and subsidiaries, as the Corporation has under sections 8(t), 10(b), 11, 12, 13(d), 13(e), 15, and 38, with adaptations made, in the sole discretion of the Corporation, that are appropriate to the differences in form and function among depository institution holding companies, insured depository institutions, and their affiliates and subsidiaries.
Authority To obtain credit
In general
A bridge depository institution holding company with respect to which the Corporation is the receiver may obtain unsecured credit and issue unsecured debt.
Inability to obtain credit
If a bridge depository institution holding company is unable to obtain unsecured credit or issue unsecured debt, the Corporation may authorize the obtaining of credit or the issuance of debt by the bridge depository holding company—
with priority over any or all of the obligations of the bridge depository holding company;
secured by a lien on property of the bridge depository holding company that is not otherwise subject to a lien; or
secured by a junior lien on property of the bridge depository holding company that is subject to a lien.
Limitation
The Corporation may authorize the obtaining of credit or the issuance of debt by a bridge depository holding company that is secured by a senior or equal lien on property of the bridge depository holding company that is subject to a lien, only if—
the bridge depository holding company is unable to otherwise obtain such credit or issue such debt; and
there is adequate protection of the interest of the holder of the lien on the property with respect to which such senior or equal lien is proposed to be granted.
Disposition of certain depository institution holding companies, affiliates, and subsidiaries
Notwithstanding any other provision of law (other than a conflicting provision of this Act), the Corporation, in connection with the resolution of any insured depository institution with respect to which the Corporation has been appointed as receiver, shall—
in the case of
any depository institution holding company, or a covered affiliate or
subsidiary for which the Corporation is appointed receiver, that is a member of
the Securities Investor Protection Corporation (in this section referred to as
SIPC
), coordinate with SIPC in the liquidation, if any, of the
company, to facilitate the orderly and timely payment of claims under the
Securities Investor Protection Act; and
in the case of any other depository institution holding company, or covered affiliate or subsidiary, that is functionally regulated, coordinate with the appropriate Federal or State functional regulator in the disposition of the company, to facilitate the orderly and timely payment of claims under applicable guaranty plans, including State insurance guaranty plans.
Priority of expenses and unsecured claims
In general
Allowed claims (other than secured claims to the extent of any such security) against a covered depository institution holding company or any covered affiliate or subsidiary that are proven to the satisfaction of the receiver for such covered depository institution holding company, affiliate, or subsidiary shall have priority in the following order:
Administrative expenses of the receiver.
Any obligation of the covered depository institution holding company, or covered affiliate or subsidiary, to the Corporation.
Any general or senior liability of the covered depository institution holding company, or covered affiliate or subsidiary (which is not a liability described in subparagraph (D) or (E)).
Any obligation subordinated to general creditors which is not an obligation described in subparagraph (E).
Any obligation to shareholders, members, general partners, limited partners, or other persons with interests in the equity of the covered depository institution holding company, or covered affiliate or subsidiary, arising as a result of their status as shareholders, members, general partners, limited partners, or other persons with interests in the equity of the covered depository institution holding company, or covered affiliate or subsidiary.
Creditors similarly situated
All claimants of a covered depository institution holding company, or covered affiliate or subsidiary, that are similarly situated under paragraph (1) shall be treated in a similar manner, except that the receiver may take any action (including making payments) that does not comply with this subsection, if—
the Corporation determines that such action is necessary to maximize the value of the assets of the covered depository institution holding company, or covered affiliate or subsidiary, to maximize the present value return from the sale or other disposition of the assets of the covered depository institution holding company, or to minimize the amount of any loss realized upon the sale or other disposition of the assets of the covered depository holding company, or covered affiliate or subsidiary; and
all claimants that are similarly situated under paragraph (1) receive not less than the amount provided in section 11(i)(2).
Rule of construction
Nothing in the Resolution Reform Act is intended to supersede the administration of claims under applicable State laws governing insurance guaranty funds or the Securities Investor Protection Act of 1970.
Rulemaking
The Federal Deposit Insurance Corporation shall conduct a rulemaking to be completed within 180 days of enactment that will lay out specific guidelines and priority of all secured and unsecured claims as well as where the resources to satisfy those that will be satisfied will be derived.
.
Other specific modifications to Federal Deposit Insurance Corporation authority
Recordkeeping
Section 11(e)(8)(H) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(H)) is amended to read as follows:
Recordkeeping
The Corporation, after consultation with the appropriate Federal banking agencies, may prescribe regulations requiring that any insured depository institution or depository institution holding company maintain such records with respect to qualified financial contracts (including market valuations) as the Corporation determines to be necessary or appropriate to enable it to exercise its rights and fulfill its obligations under this Act.
.
Golden parachute payments
Section 18(k)(4)(A)(ii)(III) of the Federal Deposit Insurance Act (12 U.S.C. 1828(k)(4)(A)(ii)(III)) is amended—
by striking
institution's
;
by inserting
or covered company
after insured depository
institution
; and
by inserting
before the semicolon: , except that the Corporation may define and make
a determination of troubled condition for any covered company that does not
have an appropriate Federal banking agency
.
Cross-border claims
Purpose and scope
Purpose
The purpose of this section is to provide effective mechanisms for dealing with cases of cross-border insolvency, with the objectives of—
facilitating cooperation between the Corporation, acting in its capacity as receiver of a covered depository institution holding company or covered affiliate or subsidiary of an insured depository institution and the courts and other authorities of foreign countries involved in cross-border insolvency cases; and
facilitating the orderly resolution of insured depository institutions, covered depository institution holding companies, or covered affiliates or subsidiaries, in receivership.
Scope
This section applies in any case in which—
the Corporation seeks assistance from a foreign court, foreign representative, or foreign regulatory or supervisory authority in connection with the resolution of a depository institution holding company, or covered affiliate or subsidiary thereof;
the assistance of the Corporation is sought by a foreign court, foreign representative, or foreign regulatory or supervisory authority in connection with a foreign proceeding or with a resolution under this Act; or
a foreign proceeding and a case under this Act with respect to the same covered depository institution holding company, or covered affiliate or subsidiary, are pending concurrently.
Coordination and cooperation
In regard to matters of insolvency and insolvency proceedings, the Corporation may—
cooperate and coordinate with foreign courts, foreign representatives, and foreign regulatory or supervisory authorities, either directly or through a designated representative, as the Corporation deems appropriate; and
communicate directly with, or to request information or assistance directly from, foreign courts, foreign representatives, and foreign regulatory or supervisory authorities.
Claims by foreign representatives
The Corporation, in its capacity as receiver of a covered depository institution holding company, or covered affiliate or subsidiary, may allow a foreign administrator or representative to file claims.
Coordination of payments
Limitation
Notwithstanding any other provision of Federal law, a creditor who has received payment with respect to a claim in a foreign insolvency proceeding may not receive a payment for the same claim brought in a United States insolvency proceeding under this Act against the same depository institution, depository institution holding company, or covered affiliate or subsidiary.
Subrogation
A claimant in an insolvency proceeding under this Act that has received payment on its claim shall agree to the subrogation of the Corporation, to the extent of such payment, to any claim or right of claim, arising from the same loss.
Public policy exemption
Nothing in this section prevents the Corporation from refusing to take an action governed by this section if the action would be contrary to the public policy of the United States or if it would increase losses to the Deposit Insurance Fund.
Miscellaneous provisions
Bankruptcy code amendments
Section 109(b)(2) of title 11, United States Code, is
amended by inserting before homestead association
the following:
covered depository institution holding company and covered affiliate or
subsidiary, as those terms are defined in section 51(b) of the Federal Deposit
Insurance Act (except if the Federal Deposit Insurance Corporation exercises
its authority under section 52(c) of that Act),
.
Authority To appoint receiver
Federal Reserve Act
Section 11(o) of the Federal Reserve Act (12 U.S.C. 248(o)) is amended—
by striking
The Board
and inserting the following:
State member banks
The Board
; and
by adding at the end the following:
Covered depository institution holding companies
The Board may appoint the Federal Deposit Insurance Corporation as receiver for a covered depository institution holding company (as those terms are defined in section 51(b) of the Federal Deposit Insurance Act) under section 52 of the Federal Deposit Insurance Act.
.
Home Owners' Loan Act
Section 10 of the Home Owners' Loan Act (12 U.S.C. 1467a) is amended—
by redesignating subsection (t) as subsection (u); and
by inserting after subsection (s) the following:
Appointment of FDIC as receiver
The Director may appoint the Federal Deposit Insurance Corporation as receiver for a covered depository institution holding company (as those terms are defined in section 51(b) of the Federal Deposit Insurance Act) under section 52 of the Federal Deposit Insurance Act.
.