(a) Written recommendation and determination
(1) Vote required
(A) In general
On their own initiative, or at the request of the Secretary, the Corporation and the Board of Governors shall consider whether to make a written recommendation described in paragraph (2) with respect to whether the Secretary should appoint the Corporation as receiver for a financial company. Such recommendation shall be made upon a vote of not fewer than 2/3 of the members of the Board of Governors then serving and 2/3 of the members of the board of directors of the Corporation then serving.
(B) Cases involving brokers or dealers
In the case of a broker or dealer, or in which the largest United States subsidiary (as measured by total assets as of the end of the previous calendar quarter) of a financial company is a broker or dealer, the Commission and the Board of Governors, at the request of the Secretary, or on their own initiative, shall consider whether to make the written recommendation described in paragraph (2) with respect to the financial company. Subject to the requirements in paragraph (2), such recommendation shall be made upon a vote of not fewer than 2/3 of the members of the Board of Governors then serving and 2/3 of the members of the Commission then serving, and in consultation with the Corporation.
(C) Cases involving insurance companies
In the case of an insurance company, or in which the largest United States subsidiary (as measured by total assets as of the end of the previous calendar quarter) of a financial company is an insurance company, the Director of the Federal Insurance Office and the Board of Governors, at the request of the Secretary or on their own initiative, shall consider whether to make the written recommendation described in paragraph (2) with respect to the financial company. Subject to the requirements in paragraph (2), such recommendation shall be made upon a vote of not fewer than 2/3 of the Board of Governors then serving and the affirmative approval of the Director of the Federal Insurance Office, and in consultation with the Corporation.
(2) Recommendation required
Any written recommendation pursuant to paragraph (1) shall contain—
(A) an evaluation of whether the financial company is in default or in danger of default;
(B) a description of the effect that the default of the financial company would have on financial stability in the United States;
(C) a description of the effect that the default of the financial company would have on economic conditions or financial stability for low income, minority, or underserved communities;
(D) a recommendation regarding the nature and the extent of actions to be taken under this subchapter regarding the financial company;
(E) an evaluation of the likelihood of a private sector alternative to prevent the default of the financial company;
(F) an evaluation of why a case under the Bankruptcy Code is not appropriate for the financial company;
(G) an evaluation of the effects on creditors, counterparties, and shareholders of the financial company and other market participants; and
(H) an evaluation of whether the company satisfies the definition of a financial company under section
5381 of this title.
(b) Determination by the Secretary
Notwithstanding any other provision of Federal or State law, the Secretary shall take action in accordance with section
5382(a)(1)(A) of this title, if, upon the written recommendation under subsection (a), the Secretary (in consultation with the President) determines that—
(1) the financial company is in default or in danger of default;
(2) the failure of the financial company and its resolution under otherwise applicable Federal or State law would have serious adverse effects on financial stability in the United States;
(3) no viable private sector alternative is available to prevent the default of the financial company;
(4) any effect on the claims or interests of creditors, counterparties, and shareholders of the financial company and other market participants as a result of actions to be taken under this subchapter is appropriate, given the impact that any action taken under this subchapter would have on financial stability in the United States;
(5) any action under section
5384 of this title would avoid or mitigate such adverse effects, taking into consideration the effectiveness of the action in mitigating potential adverse effects on the financial system, the cost to the general fund of the Treasury, and the potential to increase excessive risk taking on the part of creditors, counterparties, and shareholders in the financial company;
(6) a Federal regulatory agency has ordered the financial company to convert all of its convertible debt instruments that are subject to the regulatory order; and
(7) the company satisfies the definition of a financial company under section
5381 of this title.
(c) Documentation and review
(1) In general
The Secretary shall—
(A) document any determination under subsection (b);
(B) retain the documentation for review under paragraph (2); and
(C) notify the covered financial company and the Corporation of such determination.
(2) Report to Congress
Not later than 24 hours after the date of appointment of the Corporation as receiver for a covered financial company, the Secretary shall provide written notice of the recommendations and determinations reached in accordance with subsections (a) and (b) to the Majority Leader and the Minority Leader of the Senate and the Speaker and the Minority Leader of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives, which shall consist of a summary of the basis for the determination, including, to the extent available at the time of the determination—
(A) the size and financial condition of the covered financial company;
(B) the sources of capital and credit support that were available to the covered financial company;
(C) the operations of the covered financial company that could have had a significant impact on financial stability, markets, or both;
(D) identification of the banks and financial companies which may be able to provide the services offered by the covered financial company;
(E) any potential international ramifications of resolution of the covered financial company under other applicable insolvency law;
(F) an estimate of the potential effect of the resolution of the covered financial company under other applicable insolvency law on the financial stability of the United States;
(G) the potential effect of the appointment of a receiver by the Secretary on consumers;
(H) the potential effect of the appointment of a receiver by the Secretary on the financial system, financial markets, and banks and other financial companies; and
(I) whether resolution of the covered financial company under other applicable insolvency law would cause banks or other financial companies to experience severe liquidity distress.
(3) Reports to Congress and the public
(A) In general
Not later than 60 days after the date of appointment of the Corporation as receiver for a covered financial company, the Corporation shall file a report with the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives—
(i) setting forth information on the financial condition of the covered financial company as of the date of the appointment, including a description of its assets and liabilities;
(ii) describing the plan of, and actions taken by, the Corporation to wind down the covered financial company;
(iii) explaining each instance in which the Corporation waived any applicable requirements of part 366 of title 12, Code of Federal Regulations (or any successor thereto) with respect to conflicts of interest by any person in the private sector who was retained to provide services to the Corporation in connection with such receivership;
(iv) describing the reasons for the provision of any funding to the receivership out of the Fund;
(v) setting forth the expected costs of the orderly liquidation of the covered financial company;
(vi) setting forth the identity of any claimant that is treated in a manner different from other similarly situated claimants under subsection (b)(4), (d)(4), or (h)(5)(E), the amount of any additional payment to such claimant under subsection (d)(4), and the reason for any such action; and
(vii) which report the Corporation shall publish on an online website maintained by the Corporation, subject to maintaining appropriate confidentiality.
(B) Amendments
The Corporation shall, on a timely basis, not less frequently than quarterly, amend or revise and resubmit the reports prepared under this paragraph, as necessary.
(C) Congressional testimony
The Corporation and the primary financial regulatory agency, if any, of the financial company for which the Corporation was appointed receiver under this subchapter shall appear before Congress, if requested, not later than 30 days after the date on which the Corporation first files the reports required under subparagraph (A).
(4) Default or in danger of default
For purposes of this subchapter, a financial company shall be considered to be in default or in danger of default if, as determined in accordance with subsection (b)—
(A) a case has been, or likely will promptly be, commenced with respect to the financial company under the Bankruptcy Code;
(B) the financial company has incurred, or is likely to incur, losses that will deplete all or substantially all of its capital, and there is no reasonable prospect for the company to avoid such depletion;
(C) the assets of the financial company are, or are likely to be, less than its obligations to creditors and others; or
(D) the financial company is, or is likely to be, unable to pay its obligations (other than those subject to a bona fide dispute) in the normal course of business.
(5) GAO review
The Comptroller General of the United States shall review and report to Congress on any determination under subsection (b), that results in the appointment of the Corporation as receiver, including—
(A) the basis for the determination;
(B) the purpose for which any action was taken pursuant thereto;
(C) the likely effect of the determination and such action on the incentives and conduct of financial companies and their creditors, counterparties, and shareholders; and
(D) the likely disruptive effect of the determination and such action on the reasonable expectations of creditors, counterparties, and shareholders, taking into account the impact any action under this subchapter would have on financial stability in the United States, including whether the rights of such parties will be disrupted.
(d) Corporation policies and procedures
As soon as is practicable after July 21, 2010, the Corporation shall establish policies and procedures that are acceptable to the Secretary governing the use of funds available to the Corporation to carry out this subchapter, including the terms and conditions for the provision and use of funds under sections
5384(d), 5390(h)(2)(G)(iv), and 5390(h)(9) of this title.
(e) Treatment of insurance companies and insurance company subsidiaries
(1) In general
Notwithstanding subsection (b), if an insurance company is a covered financial company or a subsidiary or affiliate of a covered financial company, the liquidation or rehabilitation of such insurance company, and any subsidiary or affiliate of such company that is not excepted under paragraph (2), shall be conducted as provided under applicable State law.
(2) Exception for subsidiaries and affiliates
The requirement of paragraph (1) shall not apply with respect to any subsidiary or affiliate of an insurance company that is not itself an insurance company.
(3) Backup authority
Notwithstanding paragraph (1), with respect to a covered financial company described in paragraph (1), if, after the end of the 60-day period beginning on the date on which a determination is made under section
5382(a) of this title with respect to such company, the appropriate regulatory agency has not filed the appropriate judicial action in the appropriate State court to place such company into orderly liquidation or rehabilitation under the laws and requirements of the State, the Corporation shall have the authority to stand in the place of the appropriate regulatory agency and file the appropriate judicial action in the appropriate State court to place such company into orderly liquidation or rehabilitation under the laws and requirements of the State.