To instruct the Inspector General of the Federal Deposit Insurance Corporation to study the impact of insured depository institution failures, and for other purposes.

Mr. Speaker, I yield myself such time as I may consume.

As my distinguished colleague from Georgia, Congressman Westmoreland, pointed out, whom I am very pleased to serve as a cosponsor with on this bill, he very aptly described the very dire situation facing our State of Georgia.

Mr. Speaker, as I stand here, Georgia, since the 2008 financial difficulties started in this country, 67 banks have failed, which makes us the leader in the Nation in this area in our State. We have some very capable business people in Georgia and in Atlanta, very sterling leaders of the financial services industry worldwide based out of Atlanta. We're grappling with the recovery.

But there is no more important sector of our economy than our banking system. It is, indeed, the heart of our economic system. It pumps out the credit. It pumps out the capital that makes our economy go around. So it is very important that we really deal with an area and with information and with an effective study so that we can grasp the full meaning of what caused this to happen, what were the characteristics in Atlanta or in Georgia that caused this disproportionate number of bank failures. And, indeed, we could learn so much so that we can prevent this type of a collapse in our bank financial system from happening again and make a very valuable contribution.

So with that, Mr. Speaker, I want to take just a moment to explain what we are doing with this important bill, H.R. 2056, that we feel will make a very valuable contribution to preventing these kinds of collapses from happening again to the detriment of our economic system.

The purpose of this bill is, one, to determine the extent to which certain FDIC practices precipitated the bank failures. We need to find out if there's something that the FDIC was doing, that regulators were doing that we need to improve upon.

Two, we need to determine whether various FDIC policies and practices for resolving failed banks are appropriate. That's very important to know. If what we're doing is not appropriate, we can fix that.

And, three, we need to determine the extent to which the FDIC employees, themselves, in the field, the investigators, the bank examiners take actions that were consistent with FDIC policies and procedures that we developed here in Washington. In other words, Mr. Speaker, we need to take the time to look at this peculiar situation of this rash of bank failures in one basic geographic area of this country to see what really went wrong and if there were some things that we were doing here in Washington that we need to correct.

And, finally, we need to determine the extent to which the FDIC policies and procedures are applied consistently across all banks. This information will be very important.

The bill requires that the FDIC Inspector General, within 1 year of enactment of this bill, will conduct a study

on the impact of the failure of banks and report the results and any associated recommendations back to Congress.

This study would address, one, the effect of the FDIC's use of loss sharing agreements on relevant stakeholders, including banks that survive and borrowers of the failed IDI. Two, the significance that paper losses, including the extent to which they trigger IDI receiverships and the impact they have on raising more capital. Three, the success of field examiners in implementing the FDIC policies and procedures on commercial real estate workouts.

One of the things we find in our State of Georgia, one of the common characteristics that sort of held these banks separate was the overleverage, we shall say, of the portfolios in real estate and the housing bubble burst on us.

Four, the application and impact of consent orders and cease and desist orders, including whether such orders are used consistently across all types of banks, and also the application and impact of FDIC policies, particularly as they relate to a bank's ability to attract private capital. And then the FDIC's handling of potential investments by private equity companies in banks.

In H.R. 2056, as introduced, we received great bipartisan support and reception at a hearing that we recently had that my colleague from Georgia (Mr. Westmoreland) mentioned and the FDIC and the OCC are working with us on this bill. And the OCC has suggested that the FDIC Inspector General should consult with the OCC Inspectors General with respect to studied topics that pertain to banks that the OCC, which is the Office of the Comptroller of the Currency, directly supervisors and, of course, that same logic would argue for consultation with the Fed.

So subsequently, an amendment was adopted by voice vote in the full committee in the markup, requiring that the FDIC Inspector General consult with the Inspectors General of the Treasury, within which the OIC is housed, and the Fed. This amendment was passed by voice vote with strong bipartisan support to supplement the study factors regarding the loss sharing agreements. It added new study factors regarding appraisals and capital. It required the FDIC's Inspectors General to coordinate with the Treasury and the Fed's internal Inspectors General. And four, it added a new separate GAO study on bank failures to the report due 1 year after enactment. And I might add that both the FDIC as well as the OCC are supportive of this measure.

In conclusion, Mr. Speaker, this bill is very important for us not only in Georgia but across this country where we've had this rash of bank failures. It's important for us to learn and to know about the causes of the bank failures in the States that have been hardest hit, especially the issue of application and effect of consent orders and cease and desist orders, particularly where these orders have been enforced uniformly and fairly across all banks. This has been a concern from our banking community in Georgia.

While I know this bill alone will not solve our current banking crisis, I am confident it will provide Congress and regulators with valuable information that may prevent failures in the future and provide us with ways that the FDIC, that the OCC and the Fed, our banking regulators and examiners, can help our banks avoid bank failures.

If we're ever going to climb out of this terrible economic malaise that we're in and spark growth in our communities, it is the banks that must be stable. It is the banks that must be well-capitalized and able to lend to consumers and small businesses. And in particular, our small and community banks are the ones that will lead the way to our economic recovery, but only if they're able to work, hand-in-hand, with our Federal regulators and examiners to remain viable.

This bill is a small step, but it is a big step in the right direction in that respect, and I encourage all of my colleagues to support it.

I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2056) to instruct the Inspector General of the Federal Deposit Insurance Corporation to study the impact of insured depository institution failures, and for other purposes, as amended.

I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks and to add extraneous material on this bill.

I yield myself such time as I may consume.

Mr. Speaker, the bill before the House today is one that will provide much needed transparency to the FDIC process of examining and resolving banks.

First, I would like to thank Chairman Bachus and Subcommittee Chairman Capito, Ranking Member Frank and Subcommittee Ranking Member Maloney for their support of H.R. 2056.

I'd also like to thank my lead cosponsor, the gentleman from Georgia, my friend, Representative Scott, for his tireless support on this issue.

As I have said many times before, there is no greater threat to our communities than bank failures, especially in my State of Georgia.

Mr. Speaker, I want to take a minute to highlight bank failures by the numbers in my State of Georgia: 319 is the total number of failures in the U.S. since 2008; 67 of those, that's the total number of Georgia bank failures since 2008; 16, this is the number of banks in Georgia that failed in 2011; 11 banks have failed in my congressional district.

Mr. Speaker, I would like to get you to look at this chart, and you can see by this chart that these communities, these 10 States, have had the largest closing number. Their unemployment rate is some of the highest, the deficiency rates. And if you look at the percentages, if you look at Arizona, 30 percent of their banks have closed; Nevada, 41 percent of their banks have closed; and in my State of Georgia, 26 percent have closed. Sadly, there are some communities in my district that no longer are even served by a community bank.

And I have often referenced these, the 10 over 10, and these are the 10 States that have had more than 10 bank failures since 2008. As you can see these unlucky States are Georgia, Florida, Illinois, California, Minnesota, Washington, Michigan, Nevada, Missouri, and Arizona. In fact, six of these 10 States have had more than 10 percent of their banks fail in the past 3 years.

These States also share other commonalities. As I mentioned, each have a higher than average unemployment rate and serious delinquency rates as well as a high number of bank failures.

While I hope no more States are added to this list, many States are not far off. Colorado has had nine failures, including one on Friday. Kansas and Oregon have had seven failures.

Without a doubt, the FDIC is a wealth of information about the health of banks, if you have the time and resources to go through it. However, too much information without proper context can be detrimental. H.R. 2056 is designed to cut through all the information to analyze the underlying fundamentals that continue to cause bank failures across this country.

The bill directs the FDIC Inspector General, in consultation with the Treasury and Federal Reserve IGs, to study FDIC policies and practices with regard to loss share agreements, the fair application of regulatory capital standards, appraisals, FDIC procedures for loan modifications, and the FDIC's handling of consent orders and cease and desist orders.

Further, the GAO also has a study in the bill to pursue those questions the FDIC Inspector General is unable to fully explore, such as the causes of the high number of bank failures, procyclical impact of fair value accounting, analysis of the impact of failures on the community, and the overall effectiveness of loss share agreements for resolving banks.

I have welcomed the input from the FDIC IG as well as witnesses from the FDIC, the Office of the Comptroller of the Currency, the Independent Community Bankers Association, and the witnesses at the hearing 3 weeks ago. Overwhelmingly, these witnesses supported H.R. 2056. Likewise, the Financial Services Committee passed H.R. 2056 out of committee last week by voice vote.

Mr. Speaker, it is clear that Congress needs more information about the underlying causes of these bank failures.

I reserve the balance of my time.

Mr. Speaker, I yield myself as much time as I may consume.

Mr. Speaker, our hope is that this will shed some light on these bank failures. We hope it will also shed light on why so many business people have come to all of us in this body to find out why they cannot get loans to promote job growth, to help expand their businesses. We need those answers.

We also need to make sure that this study will shed some light on what effects TARP and Loss-Share Agreements have had on our community banks. We also hope that it will shed light on why immediate write- downs are being demanded on our community banks when the loans are performing. People are paying their interest. They're meeting their renewal requirements, yet regulators are insisting that these loans be marked down. This has caused what I call a paper loss for a lot of these bankers that are then being made to ask to raise capital when they're under cease and desist orders.

So all of this does not work together. And, in fact, a lot of things that we have done in this previous Congress has caused the snowball to roll faster downhill.

I hope they'll look at the market to see what has happened and what is the effect of banks that have gotten TARP money and have come in and ``fire sold'' properties that have caused real property values to go down, not just for the banks, but for the people that have bought in there.

We need to find out why Loss-Share Agreements promote not modifying loans, why they promote getting rid of some of these bad loans, why they promote a bank to be able to get rid of property when the government guarantees them 95 percent of their loss. What effect has that had on our community banks that didn't get the TARP, that have not been allowed to be in any of these Loss-Share Agreements?

These are answers that we're looking for.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

Mr. Speaker, I object to the vote on the ground that a quorum is not present and make the point of order that a quorum is not present.

Mr. Speaker, I move to suspend the rules and concur in the Senate amendments to the bill (H.R. 2056) to instruct the Inspector General of the Federal Deposit Insurance Corporation to study the impact of insured depository institution failures, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and to add extraneous material.

Mr. Speaker, I yield myself such time as I may consume.

The bill before the House today is one that will provide much needed transparency to the FDIC, the Federal Reserve, and the OCC bank examination and resolution procedures.

First, I'd like to thank Chairman Bachus and Subcommittee Chairwoman Capito, Ranking Member Frank, and Subcommittee Ranking Member Maloney for their support of H.R. 2056.

I'd also like to thank Senator Chambliss and his staff for working to pass this bill on the Senate side. We are pleased to have an agreement with the other Chamber, which is highly unusual, and look forward to the outcome of this study.

As I have said many times before, there is no greater threat to our communities than bank failures, especially in my State of Georgia. Since the House last debated this bill in July, more banks in Georgia have been closed by the regulators. Now 73 banks are no longer serving their communities, and 22 banks alone have failed in 2011. Sadly, there are some communities in my district that are no longer served by a community bank.

I have often referenced the so-called ``ten over ten.'' These are the 10 States that have had more than 10 bank failures since 2008. These 10 unlucky States are Georgia, Florida, Illinois, California, Minnesota, Washington, Michigan, Nevada, Missouri and Arizona. In fact, six of the 10 States have had more than 10 percent of their banks fail in the last 3 years.

Mr. Speaker, the deeper I dig into the actions of the FDIC, the Fed and the OCC, the more concerned I am that our community banks are being regulated like public utilities rather than the job creators they are. H.R. 2056 is designed to cut through all the information to analyze the underlying fundamentals that continue to cause bank failures across this country.

The bill directs the FDIC Inspector General, in consultation with Treasury and the Federal Reserve IGs, to study the bank regulators' policies and practices with regard to loss share agreements, the fair application of regulatory capital standards, appraisals, the FDIC procedures for loan modifications, and the FDIC's handling of consent orders in cease and desist orders.

Further, the GAO also has a study in the bill to pursue those questions that the FDIC IG is unable to fully explore, such as the causes of the high number of bank failures. The impact of fair market value accounting has been a tremendous impact on our banks. Analysis of this impact of the failures on the community banks is especially needed. The overall effectiveness of loss share agreements for resolving banks is another thing that should be looked at very carefully.

The changes made by the Senate now ensure that the House Financial Services Committee and the Senate Banking Committee will have a hearing on this important study once it is issued.

I know this bill can never bring back the banks that have been lost in this crisis, but this bill and the study will provide Congress and the communities in my district and in other districts the information they need to ensure these failures never happen again.

I encourage my colleagues to support this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield such time as she may consume to the chairwoman of the Financial Institutions Subcommittee of Financial Services, the gentlelady from West Virginia (Mrs. Capito).

Mr. Speaker, I want to encourage all of the Members to vote for this. As the chairlady mentioned, we had a field hearing in my district with my colleague Mr. Scott from Georgia, also. I think it was a very good field hearing. We had testimony from bankers and from borrowers about the different regulations that had interfered with their ability to actually do business and the difference in the capital requirements that the FDIC is putting on some of these banks.

We understand that the FDIC has to enforce the rules, but we do think there are some cases, as the ranking member mentioned, that there has been some overbearing on some loans that have been performing and are quality loans. So we think that this study will at least open some people's eyes to this and give us a better idea on maybe some of the things that we need to do to make sure that our community banks stay open.

Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.

Mr. Speaker, I object to the vote on the ground that a quorum is not present and make the point of order that a quorum is not present.

Mr. Speaker, I yield myself such time as I may consume.

This was a matter brought to me by the gentleman from Georgia who just spoke, and his Georgia colleague, the gentleman, Mr. Scott, who's a member of the Financial Services Committee, because of their understandable concern that the impact bank failures could have in the State they represent. I am very supportive.

I do want to make clear that nothing in the passage of this should be taken as a criticism of the FDIC. I have been very impressed with the leadership that was given to the FDIC by the recently retired chair, Sheila Bair, an appointee of President Bush, who was not only, I think, a first-rate chair at the FDIC, but gave us a great deal of her useful advice as we dealt with financial reform.

Bank failures are an unfortunate fact of life. We don't want them to be done unnecessarily, but neither can they be avoided. And, obviously, in the overwhelming majority of cases, the problem is in the business community. The right to fail, as we must remind ourselves, is part of the right to do business.

Having said that, I agree that what the FDIC does should be very transparent. And there is one aspect of what the FDIC does, not directly affected in this bill, but it's one that I think you have bipartisan agreement on in the committee, namely, and I will mention this because of its impact on our economy.

Understandably, bank examiners felt very sensitive to criticism that during the first part of this century they did not say no to enough loans. Loans were made in the mortgage field that shouldn't have been made, but you cannot retroactively go back and undo that by now being too tough and denying loans that should be made. And we have had a frustration on the part of members of our committee because we hear reports from people in the field in the community banks that bank examiners are being too tough.

No one wants to encourage imprudent lending, and the bank regulators tell us they agree with that; but I want to take every opportunity I can to remind the bank examiners that if they run into a situation in which no bank loan ever defaults, then they have been too tough because perfection is unattainable; and what we want to do is minimize the number of failures, but not move them out all together with a regime that will keep good loans from being made.

Having said that, to go back to this, it is appropriate that we get a full study of what happens when a bank fails; and we would ask the FDIC, when they are dealing with a failed bank, to take into account the needs of that particular community so that the disposition is one that has some sensitivity, and that is what I think is here.

I would just say, with regard to community banks, there was a continued recognition they're important. And I would just note in the financial reform bill signed last year, there were several provisions that were in there at the specific request of the community banks to help them. For example, one of the disadvantages community banks have felt is that people with large amounts to deposit would go to larger institutions because the limitation on deposit insurance would make them a little worried about going to a community bank.

We increase that number from $100,000 to $250,000, which is a significant advantage for community banks over the prior situation.

We also, for the first time in our history, change the way in which assessments are levied on banks for deposit insurance by introducing a risk factor. Before the bill was signed, every deposit was levied the same amount of insurance cost. Now there is a risk factor, which means that, dollar for dollar, the larger institutions which engage in riskier activities will be paying more than the smaller institutions.

We also extended, for a period--I would have liked to make it permanent; we didn't have the votes to do that--the transactional accounts.

So, yes, we are aware of the importance of community banks. And I would just repeat what I said at the first, because I have found, surprisingly, that not everybody listens to everything I say the first time I say it. This is not meant as a criticism of the FDIC. It is a recognition of the importance of this process being open and that people understand it.

So I say to the gentleman from Georgia (Mr. Westmoreland), the gentleman from Georgia (Mr. David Scott), they were serving their constituents well by bringing this forward, and I hope the bill passes.

I reserve the balance of my time.

I yield back the balance of my time.

Mr. Speaker, as an elected Representative from one of the states hardest hit by the financial crisis, I strongly support H.R. 2056, introduced by my colleague, Representative Lynn Westmoreland, which takes a closer look at how our Nation's small community banks are failing at the hands of overzealous regulators.

H.R. 2056 directs the Federal Deposit Insurance Corporation (FDIC) and the Government Accountability Office to study whether certain practices and procedures employed by federal regulators while examining financial institutions has played a role in a record number of community banks failing in recent years. Among these are important issues relating to loss-sharing agreements and examiners' policies relating to appraisals.

Among other things, the FDIC must determine whether financial institutions are being placed into receivership or conservatorship due to significant losses arising from loans for which all payments were made on time and the contractual terms of the loans have been met. With Congressman Westmoreland, I believe that a performing loan is exactly that--one that is performing according to the terms of the contract. A regulator should not be able to step in and interject an opinion on why the loan may not perform at some point in the future, and thus penalize a community bank.

The introduction and passage of this bill indicates that there is a real world problem here, one that deserves swift diagnosis and treatment. I have heard from bankers time and again that regulators have shifted away from considering objective evaluations of loan performance, such as borrower payment history, and looked instead to subjective opinions on whether a loan may experience difficulties in the future. No business can thrive in that kind of volatile environment. Community banks are struggling in Florida. To make matters worse, surviving banks are operating in fear of overzealous regulators and as a result, small businesses are finding it almost impossible to obtain the capital they need to expand and hire more workers. Community banks are the lifeblood of our local communities and are best positioned to help our economy recover if they are able to make loans, using reasonable underwriting standards, without being penalized by their examiners.

It has been shown that states with the highest number of bank failures also have the highest unemployment and foreclosure rates in the country. That being said, it will be difficult to realize a full national economic recovery without addressing the issue of why so many small banks are closing their doors and why so many of them are unable to make loans in their community. As Congress continues to work to see that our economy recovers, it is essential that we press regulators for answers to the issues raised in Representative Westmoreland's study.

No one wants to see a repeat of what transpired in 2008 and the effects that still linger on today. However, we must remember that small banks did not cause the financial crisis. Their business practices are by nature thorough and cautious. I urge my colleagues to take a serious look at the issues raised by Representative Westmoreland and join me in pressing financial regulators for answers.