Financial Institution Insolvency: Federal Authority over Fannie Mae, Freddie Mac, and Depository Institutions

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

Overview of the U.S. Credit Crunch and Its Effect on Fannie, Freddie, Banks, and Thrifts..........1
Introduc tion ............................................................................................................................... 1
Background on Fannie Mae and Freddie Mac..........................................................................1
FDIC and Insolvent Banks and Thrifts............................................................................................3
Backgr ound ............................................................................................................................... 3
Appointment of a Conservator or Receiver over Banks and Thrifts.........................................5
Generally ............................................................................................................................. 5
Grounds for Appointing the FDIC as Conservator or Receiver over Banks and
T hrifts ........................................................................................................................ ...... 6
FDIC’s Conservatorship or Receivership Powers.....................................................................7
Overvi ew ....................................................................................................................... ...... 7
FDIC’s Rulemaking Powers of Conservatorships or Receiverships...................................7
FDIC’s General and Incidental Powers as Conservator or Receiver..................................7
FDIC’s Explicit Powers as Conservator or Receiver..........................................................8
Statutes of Limitations Available to Conservatorships or Receiverships of Banks
or Thrifts..........................................................................................................................9
FDIC’s Additional Conservatorship Powers.......................................................................9
FDIC’s Additional Receivership Powers............................................................................9
FDIC’s Options for Resolving Bank and Thrift Insolvencies.................................................10
Least-Cost Resolution Requirement.................................................................................10
Cross-Guaranty and Holding Company Contribution Requirements................................11
Deposit Payoff..................................................................................................................12
Open Institution Assistance...............................................................................................13
Purchase and Assumptions (P&As)..................................................................................14
FDIC’s Claims Process as Receiver........................................................................................15
Overvi ew ....................................................................................................................... .... 15
Payment of Claims and Priority of Claimants.........................................................................15
Overvi ew ....................................................................................................................... .... 15
Priorities ............................................................................................................................ 16
Agreements Against the Interests of the FDIC.................................................................17
Fannie Mae and Freddie Mac........................................................................................................17
Before P.L. 110-289: OFHEO’s Powers as Conservator.........................................................17
New Powers Granted by P.L. 110-289 to Deal with a Failing Fannie or Freddie...................19
Overvi ew ....................................................................................................................... .... 19
Notable Differences Between the FDIC’s Authority and that of the FHFA......................19
Grounds for Appointing the FHFA as Conservator or Receiver..............................................19
FHFA Conservatorship or Receivership Powers.....................................................................20
Overvi ew ....................................................................................................................... .... 20
FHFA’s Rulemaking Powers as Conservator or Receiver.................................................20
FHFA’s General and Incidental Powers............................................................................20
FHFA’s Explicit Powers as Conservator or Receiver........................................................20
Statutes of Limitations Available to the FHFA as Conservator or Receiver.....................21
FHFA’s Additional Conservatorship Powers.....................................................................22
FHFA’s Additional Receivership Powers..........................................................................22
FHFA’s Options for Resolving Insolvencies and the Inapplicability of the Least-Cost
Requirement.........................................................................................................................22

Claims Process........................................................................................................................23
Overvi ew ....................................................................................................................... .... 23
Payment of Claims............................................................................................................23
FHFA Priority....................................................................................................................23
Agreements Against the Interests of the FHFA.................................................................24
Author Contact Information..........................................................................................................24

On September 7, 2008, the Secretary of the Treasury announced that the Federal Housing Finance
Agency (FHFA), the newly installed regulator of the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), had been ¹
appointed conservator of the two enterprises. Until the enactment of the Housing and Economic
Recovery Act of 2008 (P.L. 110-289), there was no clear statutory authority for dealing with the
insolvency of either or both of these two mortgage giants. Among the reforms included in P.L.
110-289 were extensive provisions providing the FHFA with powers that substantially parallel
those accorded the Federal Deposit Insurance Corporation (FDIC) to deal with every aspect of
insolvencies of any bank or thrift institution that holds federally insured deposits.
The government’s takeover of Fannie Mae and Freddie Mac is expected to have a great impact
upon the mortgage market. Together they guarantee or own mortgages valued at more than $5
trillion. The powers that the FHFA will have to deal with the various assets and liabilities of the
entities and how they exercise these powers are, therefore, expected to be the focus of
congressional attention. There is also likely to be increased congressional oversight of the FDIC’s
activities resolving bank and thrift failures because the FDIC has had to close down ten banks ^st
during the first eight months of 2008, as compared with three in the first seven years of the 21
Century.
Because it is the model on which the FHFA’s conservatorship and receivership authorities are
based and because there has been sufficient experience with it to provide guidance as to how the
FHFA is likely to operate, the FDIC’s bank and thrift insolvency process is set forth in some
detail. That is followed by an exposition of the authority given to FHFA in P.L. 110-289. The
issues discussed include how the process is initiated; when a conservatorship is selected; when a
receivership is selected; any differences between the two; when judicial review is available; what
priorities are established for claims against a receivership; and what authority exists for
repudiating claims.
Fannie Mae and Freddie Mac are congressionally chartered, but privately owned financial
corporations established to create and maintain a secondary mortgage market. Fannie Mae and
Freddie Mac (also called government sponsored enterprises or GSEs) are not mortgage
originators or direct lenders. Rather, they purchase mortgages from lenders and either securitize
those loans or hold them in their own portfolios. The two enterprises have grown to be two of the ²
largest financial institutions in the world.

¹^{For m}^o^re^inf^o^rm^a^{tion o}ⁿ^the^e^c^o^nom^ic^c^onditi^ons^tha^t^lⁱ^k^e^l^y^p^l^aye^d^{a l}^a^{rge ro}^l^eⁱⁿ^F^aⁿⁿⁱ^e^an^{d F}^r^eddi^{e’s f}^a^l^l^,^see^CRS
^R^e^por^{t R}^L³⁴¹⁸^2,^Fⁱⁿ^anc^ia^{l C}^r^isⁱ^s^{? The}^Liq^u^id^ity^C^r^unc^{h o}^f^Au^gus^{t 20}⁰⁷^{, by}^D^a^rr^y^l^{E. G}^e^tte^{r e}^t^a^l^.
²^{CRS Rep}^o^r^{t CRS Rep}^o^{rt RL}³³⁷⁵⁶^,^F^aⁿⁿⁱ^{e Ma}^e^aⁿ^d^F^r^eddⁱ^{e Ma}^c^:^A^L^e^ga^l^aⁿ^d^P^o^lⁱ^{cy Overvi}^ew^{, by}^N^.^Eric^We^is^s
^a^{nd Mic}^h^a^e^l^{V. Se}^itz^ing^e^r.

Early in the 20^th Century, before the development of a secondary mortgage market, existing
mortgage markets varied greatly by locality. Much of the lending industry was concentrated in
large, metropolitan areas like New York and Chicago, leaving credit in short supply outside of
those areas of concentration. These geographic barriers constrained the operation of supply and
demand for the home mortgage market and spurred the need for a secondary market to create a
national mortgage market. As a way to meet this goal, Congress enacted the National Housing
Act of 1934, which created Fannie Mae as a purely public governmental agency. In 1954, Fannie
Mae was re-chartered into a mixed private and public institution. Congress, in 1968, split Fannie
into two distinct entities, one serving the secondary mortgage market function, which retained the
Fannie Mae name, and the other, called Ginnie Mae (Government National Mortgage
Association) to carry out government subsidy functions. This legislation transformed Fannie Mae
into the privately owned GSE it is today. Congress originally chartered Freddie Mac in 1970 as
subsidiary of the Federal Home Loan Bank System to serve a different purpose than Fannie.
However, Congress, in 1989, turned Freddie into a privately owned corporation just like Fannie ³
Mae and also aligned Freddie’s mission to that of Fannie.
In exchange for providing their public policy missions of stabilizing and correcting problems in
the U.S. mortgage market, Fannie Mae and Freddie Mac receive a number of government
benefits, most notably the presumption by investors of government backing. Prior to the passage
of P.L. 110-289, the Housing and Economic Recovery Act of 2008 and the naming of the FHFA
as their conservator on September 7, 2008, this government backing was merely presumed. Yet,
the presumption of federal backing generally allowed these two GSEs to borrow money at rates
just slightly higher than that of the federal government.
In response to widespread concern that the two enterprises were insolvent and a subsequent sharp
downturn in their stock values in the second quarter of 2008, P.L. 110-289 made the government
guarantee much more explicit by temporarily authorizing the Secretary of the Treasury the
discretion to extend credit to or buy any obligations of the two enterprises, subject only to the ⁴
federal debt limit. Basically, if Fannie or Freddie could not sell their debt securities or raise
capital in the private market, this law authorizes the Treasury to buy unmarketable debt securities
or recapitalize the firms by purchasing the GSEs’ stock. Prior to the appointment of the FHFA as
conservator, spokespersons for the Treasury had stated that there were no plans to use this ⁵
authority, rather it “should be interpreted as a prudent preparedness measure and nothing more.”
However, the Treasury changed course upon Fannie and Freddie entering conservatorship. One
response to the appointment of the FHFA as conservator made by the Treasury is:
^th^{e estab}^lⁱ^s^h^m^eⁿ^{t o}^f^aⁿ^e^w^sec^u^r^e^d^len^dⁱⁿ^g^cr^ed^{it f}^aci^lit^y^w^h^ich^w^{ill b}^e^m^a^d^e^av^ailab^l^{e to}
^Fann^{ie Mae, Freddie Mac, an}^d^th^{e Federal Ho}^m^e^L^o^an^Bank^s^{... [w}^hⁱ^c^h^{] is}ⁱⁿ^ten^d^e^d^t^o^s^e^r^v^e
^{as an}^u^lti^m^a^{te liq}^uⁱ^dⁱ^t^y^b^ack^sto^p^{, in}^essen^{ce, i}^m^p^l^e^m^eⁿ^tiⁿ^g^t^h^{e te}^m^p^o^r^ar^y^lⁱ^q^uⁱ^dⁱ^ty^b^a^c^k^s^t^o^p⁶
^au^t^h^ori^t^y^g^r^aⁿ^t^e^{d b}^y^C^oⁿ^g^r^{ess i}ⁿ^[P^.L^{. 110-}^289]^....

³^For^m^o^r^e^g^e^ne^r^a^{l inf}^o^r^m^a^{tion on}^Fa^nnie^Ma^e^aⁿ^{d Fr}^e^ddic^Ma^c^,^see^id^.
⁴^P^.^L^.¹¹^0-²⁸⁹^§¹¹¹⁷^.
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^http:^//w^w^w^.ny^tⁱ^m^e^s^.c^o^m^/²⁰^08/⁰⁸^/06/^busⁱⁿ^e^s^s^/^06m^or^g^a^n.htm^l^{, qu}^ot^ing^B^r^ook^ly^Mc^L^a^ug^{hlin, a}^s^pok^e^s^w^o^m^aⁿ^f^o^r^the
^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^T^r^ea^s^u^r^y^.
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^Fⁱⁿ^aⁿ^{ce A}^g^en^{cy A}^c^tⁱ^oⁿ^t^o^P^r^o^t^ect^Fⁱ^naⁿ^cⁱ^a^l^Ma^rket^{s a}ⁿ^d^T^a^xpa^yers^{, Se}^pte^m^be^{r 7, 2}⁰⁰⁸^,^htt^p^://w^ww.tre^a^s^.g^ov^/pre^ss/
^r^e^le^a^s^e^s^/^hp1¹²^9.^htm^.

To help recapitalize the firms, the Treasury purchased $1 billion of senior preferred stock in each ⁷
of the enterprises. The Treasury also unveiled plans to begin purchasing GSE mortgage-backed ⁸
securities at such time and in such amounts as determined by the Treasury Secretary.
In addition to authorizing the Treasury to support Fannie and Freddie in these ways, P.L. 110-289
dissolved the Office of Federal Housing Enterprise Oversight (OFHEO), the GSE’s former
regulator, and established the FHFA as their new regulator and afforded it greater authority to deal
with a financially troubled Fannie or Freddie. In contrast to OFHEO’s authority as conservator to
resolve a failed Fannie or Freddie prior to the enactment of P.L. 110-289, the FHFA’s authority is ⁹
broader and more flexible, having been modeled on the Federal Deposit Insurance Act (FDI Act).
To understand the FHFA’s new powers, the FDI Act is described in detail next.

The FDIC administers federal deposit insurance under the authority of the FDI Act. It is a federal
agency that administers the deposit insurance fund, which is comprised of premiums assessed on ¹⁰
the basis of the amount of insured deposits held by an institution. If any bank or thrift with
FDIC-insured deposits fails, the FDIC must see to it that insured deposits are protected (i.e., that
any insured deposits in the failed bank or thrift are either paid off or transferred to another
institution). This process generally requires significant disbursements from the deposit insurance
fund and results in the FDIC being the largest creditor of the failed institution.
Federal deposit insurance is backed by the full faith and credit of the United States;¹¹ therefore, if
the deposit insurance fund is exhausted, the funds of the federal government are at risk. This
means that if there were multiple bank or thrift failures that exhaust the deposit insurance fund,
federal appropriations would be necessary to supplement the deposit insurance fund and protect ¹²¹³¹⁴
insured depositors. Because of the possible threat to the federal fisc and for other reasons,

⁷^U^.^{S. D}^e^pt^{. of}^T^r^e^a^s^ur^y^,^F^a^ct^S^h^e^et^{: T}^r^ea^su^{ry S}^eⁿⁱ^o^r^P^r^ef^erred^S^t^{ock P}^u^rch^a^s^{e A}^g^reemen^t^,^Se^pte^m^be^r^{7, 2}⁰⁰⁸^,
^http:^//w^w^w^.tr^e^a^s^.g^ov^/^p^r^e^s^s^/^r^e^le^a^s^e^s^/r^e^por^ts^/^p^s^p^a^_^f^a^c^t^s^h^e^e^t^_090⁷⁰⁸^%^20h^p1¹²⁸^.p^df^.
⁸^U^.^{S. D}^e^pt^{. of}^T^r^e^a^s^ur^y^,^F^a^ct^S^h^e^et^{: GS}^E^Mo^rt^ga^g^e^B^a^cked^S^ecu^ri^tⁱ^{es P}^u^rch^a^s^{e P}^r^og^ra^m^,^htt^p^://w^ww^.tre^a^s^.g^ov^/^p^re^ss/
^r^e^le^a^s^e^s^/^r^e^por^ts^/^m^bs^_^f^a^c^t^s^h^ee^t_0⁹⁰⁷⁰⁸^hp¹¹²⁸^.p^df^.
⁹^{12 U}^.^S.C^.^§^§¹⁸¹¹^-¹⁸^35a^.
¹⁰^For^a^de^s^c^rⁱ^ptioⁿ^of^de^pos^it^ins^u^r^a^nc^e^,^see^C^R^S^R^e^por^{t R}^S²⁰⁷²^4,^Fe^de^r^a^{l D}^e^pos^it^a^nd^Sh^ar^e^Iⁿ^s^u^r^anc^e^:^Pr^o^pos^a^l^s
^for^C^h^an^ge^{, by}^W^a^lte^r^W^.^Euba^nk^s^.^T^h^e^FD^I^C^c^u^r^r^e^ntly^s^e^ts^the^D^e^sⁱ^gⁿ^a^t^e^d^R^e^s^e^r^v^e^R^a^{tio a}^t^1.²⁵^p^e^r^c^eⁿ^{t or}^$¹^.²⁵^on
^e^v^e^r^y^dolla^r^of^ins^u^r^e^d^de^posⁱ^t^s^.⁷²^Fe^d.^Re^g.⁶⁵⁵^{76 (}^N^ov^em^be^r²¹^{, 20}⁰⁷⁾^.
¹¹^{12 U}^.^S.C^.^§¹⁸²⁸⁽^a⁾⁽¹⁾⁽^B⁾^.
¹²^A^c^c^o^r^d^ing^t^o^Tⁱ^m^o^th^y^C^u^r^r^y^a^{nd Ly}^{nn Shi}^but^,^T^h^e^C^o^s^t^{of t}^h^e^S^a^vⁱ^ngs^an^{d L}^o^aⁿ^C^r^is^is^:^Tr^uth^an^d^C^ons^e^que^nc^e^s^,
¹³^FD^I^C^B^a^nk^ing^R^e^v^.²⁶^{, 3}³⁽²⁰⁰⁰⁾^,ⁱⁿ^the^s^a^vⁱ^ng^s^a^{nd l}^o^aⁿ^c^r^is^is^of¹⁹⁸^5-¹⁹⁹⁵^,^1,⁰⁴^{3 thr}ⁱ^f^t^s^f^a^ile^d^w^{ith a}^s^s^e^ts^of
^ov^e^r^$50⁰^billi^on^{, c}^o^stiⁿ^g^ta^x^p^a^y^e^r^{s $1}²⁴^billi^on^aⁿ^d^the^t^h^rif^tⁱⁿ^du^str^y^{, $29}^bi^llio^n.
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^g^o^v^e^rⁿ^m^e^{nt c}^ontr^o^{l of}^ba^nk^aⁿ^{d t}^h^rⁱ^f^t^ins^o^lv^eⁿ^cⁱ^e^s^.^S^ee,^e.^g^.^,^D^a^vⁱ^{d A}^.^Sk^e^e^l^{, J}^r^.,^The^Law^an^{d Fi}^na^nc^e^{of B}^ank^an^d
^In^su^ran^{ce In}^so^l^ven^{cy R}^e^gu^l^a^tⁱ^oⁿ^,^{76 T}^e^x^.^L^.^R^e^v^.^{723 (}¹⁹⁹⁸⁾^{. (}^H^e^r^eⁱ^na^f^t^e^r^{, Sk}^e^e^l⁾^.^I^t^ha^s^a^l^s^o^be^eⁿ^s^u^g^g^e^s^t^e^d^tha^t^the
^rⁱ^s^k^of^insⁱ^de^r^a^bus^e^is^a^not^he^r^prⁱ^m^a^r^y^r^e^as^{on f}^o^r^tr^e^a^ting^ba^nk^or^t^h^rⁱ^f^t^ins^o^lv^eⁿ^cⁱ^e^s^u^nde^r^a^s^p^e^cⁱ^a^l^r^e^gⁱ^m^e^.^Se^e^{, P}^e^te^r
⁽^c^onti^nue^d.^..)

depository institution insolvencies are not handled according to the procedures available in the ¹⁵
case of other corporate bankruptcies. They are subject to a separate regime prescribed in federal
law, called a conservatorship or receivership, rather than being subject to bankruptcy court or
state court proceedings. Under this regime, the conservator or receiver, which generally is the
FDIC, is provided substantial authority to deal with virtually every aspect of the insolvency.
A conservator is appointed to operate the institution, conserve its resources, and restore it to
viability. A receiver is appointed to liquidate the institution, sell its assets, and pay claims against
it to the extent available funds allow and in accordance with priorities established in federal law.
Receiverships are more common than conservatorships. In a receivership, the FDIC wears two
hats. It functions both as receiver and in its corporate capacity as administrator of the deposit
insurance fund. In its corporate capacity, it is generally the largest creditor of the institution
because, from the deposit insurance fund, it will have either paid off the insured deposits directly
or paid another bank or thrift to assume the deposit liabilities and, thus, have a claim against the
receivership for the amount of the insured deposits.
When an insured bank or thrift becomes insolvent, the institution’s charterer,¹⁶ its primary federal
regulator, or the FDIC is authorized to act ex parte (i.e., without notice or a hearing) to seize the ¹⁷
institution and its assets and install the FDIC as conservator or receiver. Unless time is of the
essence, prior to taking such action, however, there is consultation between the institution’s
regulator and the FDIC concerning the imminent failure. This gives the FDIC time to investigate
the situation and determine a resolution strategy before releasing information to the public of the
looming insolvency. Generally, the FDIC chooses among three possible resolution strategies—a
deposit payoff (closing the bank or thrift, assuming its assets and liabilities and paying off insured
deposits); open institution assistance (providing some financial assistance in the form of a loan,
assisted merger, or purchase of assets); or a purchase and assumption (P&A) (finding one or more
institutions to take over part or all of the institution’s assets and liabilities). The FDIC must ¹⁸
choose the resolution strategy that is least costly to the deposit insurance fund. For this reason, ¹⁹
the P&A approach is chosen most often.

^(...c^on^tin^ue^d)
^{P. Sw}^ire^,^Bank^Iⁿ^s^o^lv^eⁿ^c^y^L^a^w^N^o^w^Th^{at I}^t^M^a^tte^r^s^Ag^aiⁿ^,^{42 D}^u^k^e^L^.^J^.⁴⁶⁹⁽¹⁹⁹²⁾^.
¹⁵^Se^e^{, R}^o^be^r^t^R^.^B^l^is^s^a^{nd G}^e^or^g^e^G^.^K^a^u^f^m^a^n,^U^.^{S. C}^o^r^por^a^t^e^a^nd^Bank^Iⁿ^s^o^lv^eⁿ^c^y^Re^gim^e^s^:^{A C}^o^m^par^is^oⁿ^an^d
^Ev^alu^a^tioⁿ^,²^Va^{. L}^.^&^B^u^s^.^R^e^v^.¹⁴³⁽²⁰⁰⁷⁾^{, f}^o^r^a^c^o^m^p^a^r^is^on^of^b^a^nk^a^{nd o}^t^he^r^c^o^r^por^a^t^eⁱⁿ^s^o^lv^eⁿ^cⁱ^e^s^{. (}^H^e^r^eⁱ^na^f^t^e^r^,
^Blⁱ^{ss & Kau}^f^man⁾^.
¹⁶^Sta^t^e^-^c^h^a^r^te^re^{d ba}^nk^{s a}^r^e^c^h^a^r^te^re^{d by}^sta^t^e^ba^nk^ing^a^u^thor^itie^{s. T}^h^e^prim^a^r^y^f^e^de^ra^{l re}^g^u^la^{tor of}^a^fe^de^ra^ll^y^-
^c^h^a^r^te^re^{d ba}^nk^or^thrif^t^{is its c}^h^a^r^te^ring^a^u^tho^r^ity^{. Na}^tiona^l^b^aⁿ^k^{s are ch}^art^e^red^b^y^t^h^{e Off}ⁱ^{ce o}^f^t^h^{e Co}^m^p^t^r^o^l^l^e^{r o}^f^t^h^e
^C^u^r^r^e^nc^y⁽^O^C^C⁾^;^f^e^de^r^a^{l thr}ⁱ^f^t^s^or^s^a^vⁱ^ng^s^a^s^s^o^cⁱ^a^tions^a^r^e^c^h^a^r^te^r^e^{d by}^the^O^f^fⁱ^c^e^of^T^h^rⁱ^f^t^Supe^r^v^is^{ion (}^O^T^S⁾^.^T^h^e
^pr^im^a^r^y^f^e^de^r^a^{l r}^e^g^u^la^tor^of^s^t^a^t^e^-^c^h^a^r^te^r^e^{d ba}^nk^s^is^e^ithe^r^t^h^e^B^o^a^r^{d of}^G^o^v^e^r^nor^s^of^the^Fe^de^r^a^{l R}^e^s^e^r^v^e^S^y^s^t^em⁽^F^e^d⁾
^{or the}^{FDIC, de}^pe^nd^ing^u^p^oⁿ^w^h^e^t^he^{r th}^eⁱⁿ^stitu^tio^{n is a}^m^e^m^b^e^r^ba^nk^{, i.e}^.^,^a^m^e^m^b^e^r^of^the^Fe^de^ra^{l Re}^se^rv^e^S^y^ste^m
^(FRS).
¹⁷^T^h^{e F}^D^{I A}^c^t^sp^eci^fⁱ^{es j}^u^dⁱ^ci^al^revi^e^w^f^o^{r o}ⁿ^l^y^oⁿ^e^t^y^p^e^o^f^coⁿ^s^ervat^o^rshⁱ^{p o}^r^recei^vershⁱ^p^app^oⁱⁿ^t^m^eⁿ^t^—F^DIC’s
^a^ppoi^ntm^e^{nt of}^its^e^l^f^a^s^r^e^ce^iv^e^r^o^r^c^ons^e^r^v^a^tor^if^de^pos^it^or^s^ha^v^e^b^e^eⁿ^una^b^l^e^to^{access t}^h^ei^{r f}^unds¹⁵^da^y^s^af^te^r^the
^a^ppoi^ntm^e^{nt by}^the^s^t^a^t^e^of^a^r^e^c^e^iv^e^r^or^c^ons^e^r^v^a^tor^.^{12 U}^.^S.C^.^§¹⁸²¹⁽^c⁾⁽⁴⁾^.^T^h^e^r^e^a^r^e^a^l^s^o^ot^he^r^s^t^a^t^ute^s^tha^t^pr^ovⁱ^d^e
^f^o^r^pos^t-^s^e^iz^ur^e^j^udicⁱ^a^l^r^e^vⁱ^e^w^{in c}^e^r^ta^{in i}ⁿ^s^t^aⁿ^c^e^s^{. E.g}^.¹²^U^.^S.C^.^§²⁰³⁽^b)⁽^a^pp^oin^t^m^e^{nt of}^a^c^ons^e^r^v^a^tor^f^o^r^a
ⁿ^a^tⁱ^oⁿ^a^l^b^aⁿ^k^).^I^t^h^a^{s al}^so^b^een^h^e^l^d^t^h^at^j^u^dⁱ^ci^al^revi^ewⁱ^s^av^ai^l^a^b^l^{e u}ⁿ^d^e^{r t}^h^{e A}^d^mⁱⁿⁱ^st^ratⁱ^v^{e P}^r^o^cedu^r^{e A}^c^t^.^Ja^m^e^s
^Ma^dis^oⁿ^L^t^{d. B}^y^H^e^c^h^{t v}^.^L^udwⁱ^g^{, 82}^F.^3d¹⁰⁸⁵⁽^D^.C^{. C}ⁱ^r^.¹⁹⁹⁶⁾^.
¹⁸^{12 U}^.^S.C^.^§¹⁸²³⁽^c⁾⁽⁴⁾^.
¹⁹^O^f^the^{40 r}^e^s^o^l^u^ti^ons^f^r^om²⁰⁰^{0 t}^o^A^u^g^u^s^t^1,²⁰⁰⁸^{, 3}⁴^w^e^r^e^P^&^A^s^.^Som^e^of^the^s^e^inv^o^lv^e^d^the^o^p^e^r^a^tion^of^the
^institu^tioⁿ^un^de^{r g}^o^v^e^rnm^e^{nt c}^{ontrol be}^tw^e^eⁿ^the^da^te^of^f^a^ilure^a^{nd the}^fⁱ^na^{l re}^sol^u^ti^on^da^teⁱⁿ^a^bri^d^g^e^ba^nk^ope^ra^te^d
^by^the^FD^I^C^{, a}^c^ons^e^r^v^a^tor^s^hi^{p o}^p^e^r^a^t^e^d^by^the^R^e^s^o^luti^on^T^r^us^{t C}^o^r^p^or^a^tio^{n or}^the^FD^I^C^{, or}^a^m^aⁿ^a^g^e^m^e^nt
⁽^c^onti^nue^d.^..)

The powers conferred on the FDIC as conservator or receiver are broad. The FDIC may “take any
action authorized by ... [the FDI Act], which the Corporation determines is in the best interests of ²⁰
the depository institution, its depositors, or the Corporation.” The basic difference between a
conservatorship and a receivership is that a conservatorship involves operating the institution as a ²¹
going concern to protect its assets until it stabilizes or is closed and a receiver appointed. A
receiver is charged with liquidating the institution and winding up its affairs. A conservatorship
may indicate that the FDIC aims to restore the institution to solvency or that the FDIC had to act
quickly without the usual lead time for investigation. In either case, a conservatorship may be
followed by a receivership if a determination is made that the institution is not viable. A bank or ²²
thrift in conservatorship remains subject to “banking agency supervision.” Otherwise, the FDIC ²³
as conservator or receiver is not subject to any other authority in exercising its powers.
Neither the creditors of an institution nor its managers have the authority to declare the institution
insolvent. The decision to appoint a receiver or conservator is at the discretion of the depository
institution’s regulators and is to be based on one or more grounds specified in section 11 of the ²⁴
FDI Act.
Under section 11, the FDIC may be appointed conservator or receiver for any insured depository
institution, i.e., any state- or federally-chartered bank or thrift, the deposits of which are insured
by the FDIC. If a receivership of a federally-chartered bank or thrift is involved, the FDIC must

^(...c^on^tin^ue^d)
^c^ons^ig^nm^eⁿ^{t pr}^og^r^a^m^ope^r^a^te^{d b}^y^the^Fe^de^r^a^{l Sa}^vⁱ^ng^s^a^{nd L}^o^aⁿ^Iⁿ^s^u^r^a^nc^e^C^o^r^por^a^tⁱ^on.
²⁰^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽^J⁾⁽ⁱⁱ⁾^.
²¹^A^p^a^ss-t^h^ro^u^g^h^con^s^ervat^o^rshⁱ^p^,^{as u}^s^ed^f^o^{r In}^d^y^M^{ac Ban}^k^,ⁱ^s^ch^osen^b^ecau^{se t}^h^{ere i}^s^no^p^r^o^vⁱ^sⁱ^oⁿ^f^o^{r a b}^rⁱ^d^{ge b}^aⁿ^k
^f^o^{r a}^thrif^t^institu^tio^{n. I}ⁿ^a^stra^ig^h^t^c^onse^r^v^a^torshi^{p, w}^h^ic^{h is ra}^re^{r t}^h^aⁿ^t^h^e^pa^ss-thr^oug^{h v}^e^rsio^{n, t}^h^e^institu^tio^{n is}
^ope^r^a^te^d^{on a}^te^m^por^a^r^y^ba^sⁱ^s^un^de^r^its^e^x^is^ting^c^h^a^r^te^r^.^B^lis^s^&^K^a^uf^m^a^{n, a}^t^151,^n.²⁰^.^S^{ee a}^l^so^P^a^tric^ia^A^.^Mc^Co^y^,
^B^a^nk^ing^L^a^w^Ma^nua^{l § 1}⁵^.^{03 (}^L^e^x^is^P^u^b.⁽²^{d e}^d⁾⁾⁽^h^e^r^eⁱ^na^f^t^e^r^{, Mc}^C^o^y⁾^.
²²^{12 U}^.^S.C^.^§^§¹⁸²¹⁽^c⁾⁽²⁾⁽^D⁾^aⁿ^d³⁽^D⁾^{. F}^o^r^e^x^am^ple^,^the^FD^I^C^w^a^s^na^m^e^{d c}^ons^e^r^v^a^tor^of^I^ndy^Ma^c^B^a^nk^{, F.S.B}^.^,
^P^a^s^a^de^na^{, C}^a^lif^orⁿⁱ^a^,^c^l^os^e^d^by^O^T^{S on J}^u^ly^8,²⁰^08.^A^s^c^ons^e^r^v^a^t^o^r^,^t^h^e^FD^I^C^tr^aⁿ^s^f^e^r^r^e^{d a}^{ll n}^on-^b^r^ok^e^r^e^d^ins^u^r^e^d
^de^pos^it^a^c^c^ounts^a^{nd s}^ubs^taⁿ^tia^lly^a^{ll of}^the^a^s^s^e^ts^{to a}^ne^w^l^y^c^h^a^r^ter^e^{d f}^e^de^r^a^{l thr}ⁱ^f^t^{, s}^e^em^ing^l^y^s^e^r^vⁱⁿ^g^the^s^a^m^e
^f^unc^{tion a}^s^a^br^idg^e^ba^nk^.^Se^e^{, Fa}^ile^{d B}^a^nk^Iⁿ^f^o^r^m^a^{tion, I}ⁿ^f^o^r^m^a^{tion f}^o^r^I^ndy^Ma^c^B^aⁿ^k^,^F.S.B^.,^P^a^s^a^de^na^{, C}^A^,
^h^t^t^p^:/^/^www^.^f^dⁱ^c.^go^v/^b^aⁿ^k^/ⁱⁿ^di^vi^du^al^/f^ai^l^e^d^/^Iⁿ^d^y^M^ac.^h^t^m^l^.^Un^d^e^r¹²^U.^S^.^C^.^{§ 18}²¹⁽^d⁾⁽²⁾⁽^F⁾^,^t^h^{e F}^D^I^C^m^a^{y o}^r^ganⁱ^ze
^a^{nd o}^p^e^r^a^t^e^a^ne^w^institutⁱ^oⁿ^c^h^a^r^te^re^{d by}^{OCC or OT}^{S, a}^{nd tr}^aⁿ^sfe^r^{to it s}^o^m^e^{or a}^{ll of}^the^f^a^ile^{d in}^stituti^{on’s a}^sse^ts
^a^{nd lia}^b^ilitie^{s. T}^h^e^r^e^{is a}^l^{so a}^u^th^o^r^ity^f^o^{r the}^{FDIC t}^o^c^h^a^r^te^{r a}^bri^d^g^e^de^pository^instit^utio^{n w}^{ith a}^li^m^ite^{d life}^of^t^w^o
^y^e^a^r^s^w^{ith the}^p^o^ssibility^of^a^one^-y^e^a^r^e^x^te^nsion.^{12 U}^.^S.^C.^§¹⁸²¹^(n).^P^r^{ior t}^o^eⁿ^a^c^t^m^e^{nt of}^the^Hou^s^ing^a^nd
^Ec^onom^ic^R^e^c^o^v^e^r^y^A^c^{t o}^f²⁰⁰^8,^P^.^L^.¹¹^0-²⁸⁹^,^§¹⁶⁰⁴⁽^a⁾^,^t^h^is^a^u^t^hor^ity^w^a^s^lim^ite^{d to c}^r^e^a^tion^of^br^idg^e^ba^nk^s^.
^A^c^c^o^rding^to^the^FD^IC’s^Re^s^o^luti^{on H}^aⁿ^d^b^ook^{, t}^h^e^us^e^of^brid^g^e^b^a^nk^s^is^“^g^eⁿ^e^r^a^l^l^y^{... lim}^ite^{d to s}ⁱ^t^u^a^tio^ns^{in w}^h^ic^h
^m^o^re^ti^m^e^{is ne}^e^d^e^d^to^pe^rm^{it the}^le^a^s^t-c^o^stly^re^solu^tioⁿ^of^a^la^rg^e^{or c}^o^m^p^le^x^institutⁱ^oⁿ^.”^{FDIC, R}^e^solutioⁿ
^Ha^ndb^ook⁹⁰^,^htt^p^://w^ww^.^f^dic^.^g^o^v^/^ba^nk^/historic^a^l^/^r^e^s^ha^ndb^ook^/ⁱⁿ^d^e^x^.htm^l.
²³¹²^U^.^S.C.^§¹⁸²¹⁽^c)(²^{)(C). T}^h^is^p^r^o^v^isioⁿ^{states: “W}^h^eⁿ^actin^g^{as co}ⁿ^s^erv^a^to^{r o}^r^receiv^e^{r ..., t}^h^{e Co}^rp^o^r^ati^oⁿ^s^h^all
^not^be^s^u^bje^c^t^to^the^dir^e^c^tio^{n or}^s^upe^r^v^is^ion^of^aⁿ^y^othe^r^a^g^eⁿ^cy^or^de^pa^r^t^m^e^{nt of}^the^Uⁿ^ite^d^Sta^t^e^s^or^aⁿ^y^Sta^t^e^{in t}^h^e
^exerci^s^e^o^f^t^h^{e Co}^rp^o^r^atⁱ^o^{n’s ri}^ght^s,^p^o^w^ers,^an^d^p^rⁱ^vⁱ^l^e^ges.^”^S^{ee a}^l^so¹²^U.^S^.^C^.^{§ 18}²¹⁽^j⁾^,^w^hⁱ^c^h^p^r^ovi^d^e^s:^“E^xcep^t^as
^pr^ov^ide^dⁱⁿ^this^s^e^c^tioⁿ^{no c}^our^t^m^a^y^tak^e^aⁿ^y^a^c^{tion e}^x^c^e^p^{t a}^t^the^r^e^que^s^t^of^the^B^o^a^r^{d of}^Dⁱ^r^e^c^t^or^s^by^r^e^g^u^la^tion^or
^o^r^d^e^r,^t^o^rest^raiⁿ^o^r^af^f^e^ct^t^h^{e exe}^r^ci^{se o}^f^p^o^w^{ers o}^r^f^uⁿ^c^tⁱ^oⁿ^s^o^f^t^h^{e Co}^rp^o^r^atⁱ^o^{n as a co}ⁿ^s^ervat^o^{r o}^r^recei^ver.^”
²⁴^{12 U}^.^S.C^.^§¹⁸²¹^.

be the appointed receiver.²⁵ Appointment of a conservator or receiver for a federally-chartered
depository institution is generally at the discretion of the institution’s chartering authority. In the
case of a state-chartered depository institution, appointment of a conservator or receiver may be
at the discretion of the state chartering authority, the primary federal regulator, or, in certain cases, ²⁶
the FDIC.
Under the FDI Act, the appointment of a conservator or receiver need not wait until insolvency,
i.e., when the institution has insufficient assets to meet its obligations. The regulators are given
sufficient authority to intervene before a deteriorating situation worsens. Appointment of a
conservator or receiver may be based on any of the following grounds, none of which absolutely
requires or mandates such an appointment:
• Insufficient assets to meet obligations.
• Dissipation of assets or earnings due to violation of statute or regulation or an
unsafe or unsound condition.
• Unsafe or unsound condition to transact business.
• Willful violation of a cease-and-desist order which has become final.
• Concealment of the institution’s books or refusal to submit to an inspection or
examination.
• Inability to meet obligations.
• Incurring of losses or likelihood of incurring losses that will deplete capital with
no reasonable likelihood of becoming adequately capitalized without federal
assistance.
• Violation of law or regulation or an unsafe or unsound practice or condition
likely to cause insolvency or weaken the institution’s condition or seriously
prejudice the interests of depositors or the deposit insurance fund.
• Consent—through a board of directors or shareholder resolution.

²⁵^T^h^{e d}^eci^si^oⁿ^t^o^app^oⁱⁿ^t^{a recei}^{ver f}^o^{r a n}^a^tⁱ^oⁿ^a^l^b^aⁿ^kⁱ^s^t^o^b^e^d^e^t^e^r^mⁱⁿ^ed^b^y^t^h^{e OCC “i}ⁿ^t^h^{e Co}^m^p^t^r^o^l^l^e^r’s
^dis^c^r^e^tion.”¹²^U^.^S.C^.^§¹⁹^{1. O}^C^C^’^s^de^cⁱ^sⁱ^on^is^g^e^ne^r^a^lly^{not s}^ubj^e^c^t^{to ju}^dicⁱ^a^l^r^e^vⁱ^e^w^{. U}ⁿ^ite^{d Sa}^v^.^B^a^nk^v^.
^Morg^eⁿ^tha^u^{, 8}⁵^F^.²^d⁸¹^{1 (D}^.C.^{Cir. 1}⁹³⁶^),^cert^.^d^eⁿⁱ^ed^,²^{99 U}^.^S.⁶⁰⁵⁽¹⁹³⁵⁾^{. I}ⁿ^a^d^diti^on^to^the^g^r^o^unds^s^p^e^cⁱ^fⁱ^e^dⁱⁿ
^the^FD^I^A^c^{t, 12 U}^.^S.C^.^§¹⁸²¹⁽^c⁾⁽⁵⁾^,^t^h^e^O^C^C^m^a^y^a^{ppoint a}^r^ecei^ver^upon^de^te^r^m^ining^tha^t^t^h^e^baⁿ^k^’^s^boa^r^d^of
^dir^e^c^t^or^s^c^o^ns^is^ts^of^le^s^s^thaⁿ^fⁱ^v^e^m^e^m^b^e^r^s^.^{12 U}^.^S^.^C^.^{§ 1}⁹¹⁽²⁾^.
²⁶^{12 U}^.^S.C^.^§^§¹⁸²¹⁽^c⁾⁽²⁾^a^{nd (}⁶⁾⁽^a^ppoi^ntm^e^{nt of}^the^FD^I^C^a^s^c^o^ns^e^r^v^a^tor^or^of^f^e^de^r^a^ll^y^-^c^h^a^r^te^r^e^{d d}^e^pos^itor^y
^institu^tio^{n a}^t^t^h^e^disc^re^tioⁿ^of^the^c^h^a^r^te^ring^a^g^eⁿ^c^y^{); 12 U.S.}^C.^§^§¹⁸²^1(c⁾⁽³⁾^,⁽⁴⁾^,⁽⁹⁾^,^aⁿ^{d (1}^{0) (a}^p^p^o^intm^eⁿ^{t of}^the
^F^D^{IC as co}ⁿ^s^ervat^o^{r o}^r^recei^{ver of}^st^at^e-ch^art^e^r^e^d^d^e^p^o^sⁱ^t^o^r^yⁱⁿ^stⁱ^t^u^tⁱ^oⁿ⁾^.^T^h^{e F}^D^{IC m}^a^y^a^ppoint^its^e^l^f^a^s^r^e^c^eⁱ^ve^r^f^o^r^a
^state-ch^artered^,^FDIC-in^s^u^r^ed^d^e^p^o^sito^ryⁱⁿ^stitu^tioⁿ^u^p^oⁿ^d^e^termⁱⁿⁱⁿ^g^th^{at (}¹^{) a state-ap}^p^oⁱⁿ^te^d^coⁿ^s^erv^a^to^{r o}^r^receiv^e^r
^ha^s^be^eⁿ^a^p^poi^nte^d^a^nd¹⁵^c^ons^e^c^utiv^e^da^y^s^ha^ve^pa^s^s^e^{d a}^{nd o}ⁿ^e^or^m^o^r^e^de^pos^itor^s^ha^s^be^eⁿ^una^b^l^e^{to w}^ithdr^a^w^aⁿ^y
^am^ount^of^ins^u^r^e^d^de^p^o^s^it^or⁽²⁾^t^h^e^ins^tit^uti^on^ha^s^be^eⁿ^c^l^os^e^d^un^d^e^r^s^t^a^t^e^law^a^{nd the}^FD^I^C^de^te^r^m^ine^s^tha^t^one^of^the
^gro^uⁿ^d^s^sp^eci^fⁱ^edⁱⁿ¹²^U.^S^.^C.^§¹⁸²¹⁽^c)(4⁾^exi^s^t^s^o^r^exi^s^t^e^d^.^If^t^h^{e F}^D^{IC act}^{s t}^o^app^oⁱⁿ^tⁱ^t^s^el^f^coⁿ^s^ervat^o^{r o}^r^recei^ver
^unde^{r a}ⁿ^y^of^thos^e^cⁱ^rc^um^s^t^aⁿ^ce^s^,^theⁱⁿ^s^titutⁱ^oⁿ^is^prov^ide^d^w^{ith a}ⁿ^o^p^p^o^rtuⁿ^ity^f^o^{r judic}ⁱ^a^l^re^vⁱ^e^w^{. 12 U}^.^S.C.^§
¹⁸²¹⁽^c)(7⁾^.^T^h^{ere i}^s^al^so^au^t^h^o^rⁱ^t^y^f^o^{r t}^h^{e F}^D^{IC t}^o^a^p^poⁱⁿ^tⁱ^t^s^el^f^as^coⁿ^s^ervat^o^{r o}^r^recei^{ver f}^o^{r an}^yⁱⁿ^su^red^d^e^po^si^t^o^ry
^ins^titu^tio^{n “}^t^o^pre^v^eⁿ^{t l}^o^s^s^to^the^de^pos^it^ins^u^ra^nc^e^f^und.¹²^U^.^S.C^.^{§ 1}⁸²¹^(c⁾⁽¹^1).

• Termination of deposit insurance coverage.
• Undercapitalization with no reasonable prospect of becoming adequately
capitalized; failing to submit an adequate recapitalization plan; or materially
failing to implement an accepted capital restoration plan.
• Critical undercapitalization²⁷ or substantially insufficient capital.²⁸
• Conviction of a money laundering offense.²⁹
The FDI Act provides the FDIC with an array of powers when acting as either a conservator or a
receiver. Supplementary powers are also provided for each of these capacities. The FDI Act
contains provisions making it clear that the powers which it assigns to the FDIC acting as a
conservator or receiver are not exclusive but are in addition to any other powers conferred on
conservators or receivers of insured depository institutions, and that in exercising its
conservatorship or receivership authority, the FDIC “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 ³⁰
the [FDIC’s] rights, powers, and privileges.” Generally, the powers conveyed to the FDIC as
conservator or receiver for federally-chartered institutions are also available to it when it is acting ³¹
as conservator or receiver for a state-chartered institution.
The FDIC is provided broad rulemaking authority to issue rules for the conduct of ³²
conservatorships or receiverships. Its Resolution and Receivership Rules are found at 12 C.F.R.,
Part 360.
The powers provided the FDIC as conservator or receiver are broad in scope. As successor to the
institution, the FDIC is authorized to operate the institution and endowed with “all the powers of
the members or shareholders, the directors, and the officers of the institution” and may collect all ³³
the obligations due to the institution, perform its duties, and preserve and conserve its assets. In

²⁷^{12 U}^.^S.C^.^§¹⁸³¹^o^(b⁾⁽¹^)(E).
²⁸^U^nde^r¹²^U^.^S.C^.^{§ 18}²¹^o⁽^h⁾⁽³⁾^{, t}^h^e^prⁱⁿ^cⁱ^pa^{l f}^e^de^r^a^{l r}^e^g^u^la^tor^of^a^c^r^itic^a^lly^unde^r^c^a^p^ita^liz^e^d^ins^tⁱ^t^u^tion^m^u^s^t
^a^ppoi^{nt a}^r^eceiv^e^{r o}^r^(w^ith^th^{e c}^oⁿ^c^u^rren^{ce o}^f^th^{e FDIC) a c}^oⁿ^s^erv^a^to^{r f}^o^{r th}^{e i}ⁿ^stitu^tioⁿ^w^ithⁱⁿ⁹⁰^d^a^y^s^a^f^{ter th}^e
^institu^tioⁿ^be^c^o^m^e^{s c}^r^itic^a^l^l^y^und^e^r^c^a^p^ita^liz^e^d^{; othe}^{r a}^c^tⁱ^{on m}^a^y^be^ta^k^e^{n prov}^ide^d^the^re^a^s^oⁿ^{s a}^r^e^d^o^c^u^m^e^nte^d^{, the}
^FD^I^C^c^onc^ur^s^,^aⁿ^d^the^de^cⁱ^sⁱ^on^is^r^e^ne^w^e^{d a}^t^the^e^nd^of^the⁹⁰^-^d^a^y^s^.
²⁹^G^r^ounds^f^o^r^a^p^poi^ntiⁿ^g^a^c^ons^e^r^v^a^tor^or^r^ecei^{ver are sp}^eci^fⁱ^edⁱⁿ¹²^U.^S^.^C.^§¹⁸²¹⁽^c)(5⁾^.
³⁰^{12 U}^.^S.C.^§^§¹⁸²¹^(c^{)(2)(B) a}^{nd (}^C^{), a}^{nd (}³^{)(B) a}ⁿ^{d (C).}^T^h^e^de^p^o^sitory^instituti^onⁱⁿ^c^onse^r^v^a^torshi^{p re}^m^a^ins
^s^ubje^c^t^to^“^b^aⁿ^kⁱ^ng^a^g^eⁿ^c^y^s^upe^r^v^is^ion.”¹²^U^.^S^.^C^.^§§¹⁸²¹⁽^c⁾⁽²⁾⁽^D⁾^a^nd³⁽^D⁾^.
³¹^{12 U}^.^S.C^.^§¹⁸²¹⁽^c⁾⁽¹³⁾⁽^A⁾^.
³²^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹⁾^.
³³^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾^.

addition to the explicit powers granted to the FDIC as conservator or receiver, the FDI Act
contains a provision delegating to the Corporation as receiver or conservator “such incidental ³⁴
powers as shall be necessary to carry out such powers.”
Among the explicit powers provided to the FDIC as conservator or receiver are the powers to:
• Merge the institution with another institution.³⁵
• Transfer any asset of the institution, including trust department assets.³⁶
• Pay valid obligations of the institution.³⁷
• Issue subpoenas.³⁸
• Use private sector services if available and most cost effective.³⁹
• Obtain temporary stays of judicial actions in which the institution is a party.⁴⁰
• Exercise rights of the insured depository institution with respect any appealable ⁴¹
judgment, including removal to federal court.
• Contract with state housing finance authorities to sell mortgage related assets of a
defaulting institution without having to secure any other approval, assignment, or ⁴²
consent.
• Avoid certain fraudulent transfers made with the intent to “hinder, delay, or ⁴³
defraud the insured depository institution.”
• Repudiate contracts (with the exception of loans from the Federal Home Loan
Banks or Federal Reserve Bank) or leases entered into by the institution, under ⁴⁴
certain conditions.

³⁴^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^J⁾^.
³⁵^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^G⁾⁽ⁱ⁾^.
³⁶^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^G⁾⁽ⁱⁱ⁾^.
³⁷^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^H⁾^.
³⁸¹²^U^.^S.C.^§¹⁸²¹⁽^d⁾⁽²^)(I)^.
³⁹^{12 U}^.^S.C^.^§^§¹²^U^.^S^.^C^.^§§¹⁸²¹⁽^d)⁽²⁾⁽^K⁾^.
⁴⁰^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹²⁾^.
⁴¹^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹³⁾^.
⁴²^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹⁶⁾^.
⁴³^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹⁷⁾^.
⁴⁴^{12 U}^.^S.C^.^§¹⁸²¹⁽^e⁾⁽¹⁾^.^T^h^e^s^t^a^t^ute^r^e^qu^ir^e^s^tha^t^t^h^e^r^e^pu^dia^tⁱ^on^d^e^te^r^m^ina^tion^be^w^{ithin a}^r^e^a^s^ona^b^l^e^tim^e^f^o^llowⁱ^ng
^t^h^{e ap}^poⁱⁿ^t^m^en^t^o^f^t^h^{e recei}^{ver o}^r^coⁿ^s^ervat^o^r.¹²^U.^S^.^C.^§¹⁸²¹^(e)⁽²⁾^.^It^lⁱ^mⁱ^t^s^d^a^mage^{s t}^o^“act^u^a^l^di^rect
^c^o^m^p^eⁿ^s^a^tor^y^dam^a^ge^s^,^”^{12 U}^.^S.^C^.^§¹⁸²¹⁽^e⁾⁽³⁾^,^aⁿ^{d c}^o^ntaⁱ^ns^s^p^e^cⁱ^fⁱ^c^pr^ov^is^ions^r^e^la^ting^t^o^v^a^rⁱ^ou^s^ty^pe^s^of^c^ontr^a^c^t^s
^an^d^l^eases.^T^h^{ese i}ⁿ^cl^u^d^e^l^{eases fo}^{r w}^hⁱ^c^h^t^h^{e i}ⁿ^stⁱ^t^u^tⁱ^oⁿⁱ^s^t^h^{e l}^e^ss^{ee o}^r^l^e^sso^r,¹²^U.^S^.^C.^§^§¹⁸²¹^(e)(4^{) an}^{d (5}^);
^coⁿ^t^{racts f}^o^{r th}^{e sale o}^f^{real p}^r^o^p^e^rt^y^,¹²^U.S^.^C.§¹⁸²¹^(e)(6^);^servi^{ce co}ⁿ^t^ract^s,¹²^U.^S^.^C^.^{§ 18}²¹^(e)(7^);^and^an^y^cert^aⁱⁿ
^se^c^u^ritie^{s c}^ontra^c^t^{, c}^o^m^m^odity^c^ontra^c^t^{, f}^o^rw^a^r^{d c}^ontra^c^t^{, re}^purc^h^a^s^e^a^g^re^e^m^eⁿ^{t, swa}^p^a^g^re^e^m^eⁿ^{t, or}^sim^ila^{r a}^g^re^e^m^eⁿ^t
^tha^t^the^FD^I^C^de^te^r^m^ine^s^{to be}^“^a^qua^lif^ie^{d f}ⁱ^na^nc^ia^{l c}^oⁿ^t^r^a^c^t^.”¹²^U^.^S.C^.^§§¹⁸²¹⁽^e⁾⁽⁸⁾^-⁽¹⁰⁾^.^T^h^e^e^x^c^e^p^{tion f}^o^r
^Fe^de^r^a^{l H}^o^m^e^L^o^aⁿ^B^a^nk^a^nd^Fe^de^r^a^{l R}^e^s^e^r^v^e^B^a^nk^loaⁿ^s^is^f^oun^{d a}^t¹²^U^.^S^.^C^.^{§ 1}⁹²¹⁾⁽^e⁾⁽¹³⁾^.

• Obtain court-ordered attachment, i.e., asset freeze, of any of the assets acquired ⁴⁵
or liabilities assumed by the FDIC as conservator or receiver.
• Enforce most of the institution’s contracts.⁴⁶
• Bring an action to hold a director or officer of an insured depository institution ⁴⁷
personally liable for gross negligence.
Special statutes of limitations apply to actions brought by the FDIC as conservator or receiver.⁴⁸
For contracts, the statute of limitation is six years, beginning on the date the claim accrues, unless
state law provides a longer period. For tort claims, the statute of limitations is three years, unless ⁴⁹
state law provides a more lenient time frame.
The FDIC, as conservator, may take any action “necessary to put the insured depository
institution in a sound and solvent condition ... and [any action which is] appropriate to carry on
the business of the institution and preserve and conserve the assets and property of the ⁵⁰
inst it ution.”
The FDIC as receiver has authority to liquidate the institution and sell its assets, “having due ⁵¹
regard to the conditions of credit in the locality.” The statute also specifies that as receiver of a
state-chartered institution, the FDIC may “liquidate the institution in an orderly manner ... and ...
make any other disposition of any matter concerning the institution, as the [FDIC] determines is ⁵²
in the best interests of the institution, the depositors of the institution, and the [FDIC].”
Generally, the FDIC as receiver has powers not available to it when acting as a conservator. It
may:
• Organize a new federal thrift or national bank or a bridge depository institution.⁵³

⁴⁵^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹⁸⁾^.
⁴⁶^{12 U}^.^S.C^.^§¹⁸²¹⁽^e⁾⁽¹²⁾^.
⁴⁷^{12 U}^.^S.C^.^§¹⁸²¹⁽^k⁾^.
⁴⁸^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹⁴⁾^.
⁴⁹^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹⁴⁾^{. T}^h^e^r^eⁱ^s^a^l^s^o^a^pr^ov^isⁱ^{on a}^u^th^or^iz^ing^t^h^e^FD^I^C^{to r}^e^vⁱ^v^e^tor^t^c^l^aⁱ^m^s^s^ubje^c^t^{to a}^s^t^a^t^e^s^t^a^t^ute
^of^lim^ita^{tion if}^the^c^l^aⁱ^m^ha^s^e^x^pi^r^e^{d no}^{t m}^o^r^e^thaⁿ^fⁱ^v^e^y^e^a^r^s^bef^o^r^e^a^ppoi^ntm^e^{nt of}^a^c^ons^e^r^v^a^tor^or^r^ecei^ver.¹²
^{U.S.C. §}¹⁸²¹^(d⁾⁽¹⁴^)(C)^.
⁵⁰^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^D⁾^.
⁵¹^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^E)^{. T}^h^is^a^ppe^a^r^s^{to m}^e^aⁿ^“^t^ha^{t the}^FD^I^C^s^hou^{ld c}^onsⁱ^d^e^r^w^h^e^t^he^r^de^pr^e^s^s^e^{d e}^c^onom^ic
^c^ondi^tio^ns^a^d^vⁱ^s^e^de^la^yⁱ^ng^aⁿ^y^s^a^leⁱⁿ^or^de^r^t^o^m^a^xⁱ^mⁱ^z^e^r^e^c^o^v^e^r^y^a^{nd a}^v^oid^f^u^r^t^he^r^de^pr^e^s^sⁱ^ng^t^h^e^e^c^onom^y^thr^oug^h^a
^g^l^{ut of}^r^e^a^l^e^s^ta^te^s^a^le^s^.^”^Mc^C^o^y^,^a^t^{§ 1}⁵^.⁰⁴^[²^]^{, te}^x^t^s^u^r^r^ou^ndi^ng^n.^60.
⁵²^{12 U}^.^S.C^.^§¹⁸²¹⁽^c⁾⁽¹³⁾⁽^B⁾⁽ⁱⁱ⁾^.
⁵³^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^F)^.

• Merge the institution with another insured depository institution or transfer assets ⁵⁴
and liabilities to another insured depository institution.
• Make rules for and determine claims against the receivership, subject to statutory ⁵⁵
prescriptions.
• Assert immunity to attachment or execution upon assets of receivership and
obtain insulation from judicial oversight of rights in assets of the receivership or ⁵⁶
claims relating to acts or omissions of the institution or the FDIC as receiver.
• Assert exemption from state and local taxes (except for real estate taxes), from
tax penalties and fines, and from liens or foreclosure on its property without its ⁵⁷
consent.
• Assert exemption from any requirement to post a bond.⁵⁸
• Appoint agents.⁵⁹
• Fix fees, compensation, and expenses of the liquidation and administration, and ⁶⁰
be paid for these out of receivership funds.
One of the guiding principles imposed upon the FDIC in resolving institutional failures is the ⁶¹
least cost resolution requirement. Under the FDI Act, the FDIC is prohibited from resolving
failing institutions in any manner unless it determines that (1) the action is necessary to protect
insured deposits, and (2) the total to be expended will cost the deposit fund less than any other
possible method. It may not take any action to protect depositors for more than the insured
portions of their deposits or protect creditors other than depositors. There is, however, a provision
that permits the FDIC to arrange purchase and assumption transactions in which the acquirer may
take on uninsured deposit liabilities if the insurance fund does not incur any loss with respect to ⁶²
them that is greater than it would have been had the institution been liquidated. To determine
which approach is least costly, the FDIC is required to evaluate alternatives on a present-value

⁵⁴^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽²⁾⁽^G⁾^.
⁵⁵^{12 U}^.^S.C^.^§^§¹⁸²¹⁽^d⁾⁽³⁾^-⁽¹¹⁾^.
⁵⁶¹²^U^.^S.C.^§^§¹⁸²¹^(d⁾⁽¹³^)(C)^an^d^(D).
⁵⁷^{12 U}^.^S.C^.^§¹⁸²⁵⁽^b)^.
⁵⁸^{12 U}^.^S.C^.^§¹⁸²²⁽^a⁾^.
⁵⁹^Id^.
⁶⁰^Id^.
⁶¹^U^nde^r^{§ 1}⁴³^of^the^Fe^de^r^a^{l D}^e^p^o^s^{it I}ⁿ^s^u^r^a^nc^e^C^o^r^p^or^a^tio^{n I}^m^pr^ov^em^eⁿ^{t A}^c^{t o}^f¹⁹⁹^1,^P.L^.¹⁰^2-²⁴²^,^the^r^e^is^a^s^e^ns^e
^of^Cong^re^{ss urg}ⁱ^ng^the^{FDIC t}^o^f^a^v^o^{r e}^a^r^l^y^re^solution^of^tro^uble^dⁱⁿ^stitutⁱ^oⁿ^{s w}^h^eⁿ^do^ing^so^inv^o^lv^e^s^the^le^a^s^{t possi}^ble
^long^-^t^e^r^m^c^o^s^t^{to the}^ins^u^r^a^nc^e^f^{und. T}^o^a^c^h^ie^v^e^this^e^nd,^the^FD^I^C^is^e^x^hor^te^{d t}^o^f^o^ll^ow^v^a^rⁱ^ous^pr^a^c^tic^e^s^{: e}ⁿ^te^rⁱ^ng
^into^c^o^m^p^e^titiv^e^ne^g^o^tia^tion;^re^qu^iring^substa^ntia^l^priv^a^t^e^inv^e^stm^e^{nt; re}^q^u^iriⁿ^g^ow^ne^{rs a}^{nd h}^o^l^d^ing^c^o^m^p^aⁿ^ie^{s of}
^trou^ble^dⁱⁿ^stit^uti^{ons t}^o^m^a^k^e^c^onc^e^ssi^{ons; m}^a^kⁱ^ng^sure^tha^t^the^r^e^is^qua^lif^ie^{d m}^a^na^ge^m^e^{nt f}^o^{r re}^sultin^g^institutⁱ^oⁿ^s;
^a^ssuring^{FDIC pa}^rticⁱ^p^a^tio^{n in}^th^e^re^sulting^inst^ituti^on^{; a}ⁿ^d^struc^t^u^r^ing^traⁿ^sa^c^{tions s}^o^t^h^a^t^the^{FDIC doe}^s^{not a}^c^q^uire
^{too m}^u^c^h^of^a^troub^le^{d i}ⁿ^stitu^tioⁿ^’^{s pro}^b^le^m^a^s^s^e^ts.
⁶²^{12 U}^.^S.C^.^§¹⁸²³⁽^c⁾⁽⁴⁾⁽^A⁾^.

basis, document the underlying assumptions, and include forgone federal tax revenues as part of ⁶³
the cost.
The least-cost resolution requirement may be waived to prevent systemic risk. Such a waiver
requires a determination by the Secretary of the Treasury, in consultation with the President, and
upon the recommendation of the FDIC and Board of Governors of the Federal Reserve System
(with 2/3’s vote from each), that complying with that requirement “would have serious adverse
effects on economic conditions or financial stability” and that action or assistance under this ⁶⁴
provision “would avoid or mitigate such adverse effects.”
Subject to the least-cost resolution requirement, the FDIC generally has three options for
resolving bank or thrift insolvencies: a depositor payout; open institution assistance; or a purchase
and assumption (P&A). The most common of these has been the P&A because it has usually been
the least costly and least disruptive to the community. It generally involves the purchase of assets
and assumption of liabilities of the failed institution by one or more healthy institutions.
Whatever assets or liabilities remain are the responsibility of the FDIC as receiver. If no acquirer
is found, the FDIC must undertake a depositor payoff and liquidate all of the failed institution’s
assets. A third option, open institution assistance, involves the FDIC providing financial
assistance to improve the capital position of an undercapitalized institution and keep it from
failing.
In exercising any of these options, the FDIC must consider the potential adverse economic effect
of any resolution on the local community and the viability of other depository institutions in the ⁶⁵
same community, and issue guidelines and take certain actions to alleviate this impact.
The FDI Act provides for cross-guarantees by insured depository institutions under common ⁶⁶
control. If the FDIC suffers a loss or anticipated loss from handling a defaulting institution or
from providing assistance to prevent a default, other depository institutions in the same holding
company are required to reimburse the FDIC up to the amount of any loss which it suffers or
anticipates suffering. The FDIC must notify the institutions of the liability within two years of ⁶⁷
incurring the loss or it cannot hold them liable. The FDIC must consult with the appropriate ⁶⁸
federal banking agency and decide on a case-by-case basis how to schedule reimbursement. It
has the discretion to waive reimbursements on the basis of what is in the best interest of the ⁶⁹
deposit insurance fund. A depository institution that has acquired control of another depository

⁶³^{12 U}^.^S.C^.^§¹⁸²³⁽^d)⁽⁴⁾⁽^B⁾^.
⁶⁴^{12 U}^.^S.C^.^§¹⁸²³⁽^c⁾⁽⁴⁾⁽^G⁾⁽ⁱ⁾^.^T^h^is^s^e^c^tion^of^the^FD^I^A^c^{t inc}^l^ude^s^pr^ov^is^io^ns^r^e^q^u^irⁱⁿ^g^the^FD^I^C^t^o^im^pos^e
^em^e^r^ge^ncy^s^p^e^cⁱ^a^l^a^s^se^s^s^m^e^nts^oⁿ^m^e^m^b^e^r^s^of^the^ins^u^r^a^nc^e^f^und;^the^Se^c^r^e^t^a^r^y^o^f^the^T^r^e^a^s^ur^y^{to doc}^um^eⁿ^{t a}ⁿ^y
^de^te^rm^ina^{tion; a}ⁿ^{d Com}^p^trolle^{r G}^e^ne^ra^{l of}^the^Unite^d^Sta^t^e^s^t^o^revi^ew^an^y^d^e^t^e^r^mⁱⁿ^atⁱ^oⁿ^t^o^p^r^o^vⁱ^d^{e assi}^st^an^ce^wⁱ^t^h
^r^e^s^p^e^c^t^{to, a}^m^ong^othe^r^t^hⁱⁿ^g^s^{, “}^t^he^lik^e^l^y^ef^f^e^c^t^of^the^de^te^r^m^ina^tⁱ^{on a}ⁿ^{d s}^u^c^h^a^c^tio^{n o}ⁿ^t^h^e^inc^eⁿ^ti^v^e^s^a^{nd c}^ond^uc^t^of
^insure^d^de^p^o^sitory^institu^tio^{ns a}ⁿ^d^uⁿ^ins^u^re^d^de^posi^t^ors.”^{12 U.}^S.^{C. §§}¹⁸²³^(d)(^4)(G^{)(ii),(iii), a}^{nd (}ⁱ^v⁾^.
⁶⁵^{12 U}^.^S.C^.^§¹⁸²¹⁽^h)^.
⁶⁶^{12 U}^.^S.C^.^§¹⁸¹⁵⁽^e⁾⁽¹⁾^.
⁶⁷^{12 U}^.^S.C^.^§¹⁸¹⁵⁽^e⁾⁽¹⁾⁽^C⁾^.
⁶⁸^{12 U}^.^S.C^.^§¹⁸¹⁵⁽^e⁾⁽²⁾⁽^B⁾⁽ⁱ⁾^.
⁶⁹^{12 U}^.^S.C^.^§¹⁸¹⁵⁽^e⁾⁽⁵⁾^.

institution through a foreclosure of pledged stock granted to secure a debt incurred in good faith ⁷⁰
may not be held liable for such a cross-guarantee.
The least used method for resolving a failed depository institution is the deposit payoff.⁷¹ When a
depository institution is closed, the FDI Act requires that the FDIC pay insured deposits “as soon
as possible ... either by cash or by making available to each depositor a transferred deposit in a ⁷²
new insured depository institution in the same community or in another depository institution.”
If the FDIC is unable to find an acquirer for the assets and liabilities of a closed institution, it may
decide upon a deposit payoff. In such cases, the FDIC will calculate the amount of insured
deposits for each customer and make those funds available to them either by direct payments
from the FDIC or by transferring the deposit accounts and an equal amount of cash from the
deposit insurance fund to a healthy institution. It will notify customers where their funds will be
available to them. In a straight payoff, the checks will be written by the FDIC and available either
at the closed bank or thrift or by mail. In an insured deposit transfer, the funds will be available at
the healthy bank or thrift, which will be acting as the FDIC’s agent.
Another option available to the FDIC to handle a closed depository institution is to create a ⁷³
temporary national bank or federally chartered thrift and transfer the failed institution’s insured
deposits to it. To do so, the FDIC must calculate the amount owed to each account holder based ⁷⁴
on a standard maximum deposit insurance amount of $100,000. Disputes about claims for
insured deposits are to be resolved first by the FDIC in accordance with its regulations, subject to ⁷⁵
judicial review under the Administrative Procedure Act.
The FDIC uses the deposit insurance fund to pay depositors up to the insurance limit or to
transfer deposit liabilities to another insured depository institution. It, therefore, steps into the
shoes of the depositors and, by virtue of what is known as subrogation, assumes their claims

⁷⁰^{12 U}^.^S.C^.^§¹⁸¹⁵⁽^e⁾⁽⁷⁾^.
⁷¹^A^c^co^rdⁱⁿ^g^t^o^th^e^{FDIC, “}^[^d^]^e^p^o^s^{it p}^a^y^o^ff^{s o}^ccu^r^m^o^{re o}^f^ten^{in sm}^a^lle^{r ba}^nk^{s ra}^the^r^thaⁿⁱⁿ^la^rg^e^ba^nk^s,”^a^{nd “}^[^f^]^rom
¹⁹⁸^{0 t}^h^r^o^ug^h¹⁹^94,^the^FD^I^C^m^a^na^g^e^{d 12}^{0 s}^t^r^a^ig^ht^de^pos^it^pa^y^o^f^f^s^out^of^a^tota^l^of^1,6^{17 f}^a^ile^{d a}ⁿ^d^a^s^sⁱ^s^t^e^d^ba^nk^s^.^”
^FD^IC,^Re^s^o^lu^tio^{n H}^a^nd^bo^ok^{, a}^t⁴³^{, h}^ttp:^//w^w^w^.f^dic^.^g^o^v^/^ba^nk^/his^to^rⁱ^c^a^l/r^e^s^ha^ndb^ook^/ⁱ^nde^x^.^htm^l^{. Fr}^o^m^{1980 t}^h^r^o^ug^h
^A^u^g^u^s^t^{1, 2}⁰⁰⁸^{, t}^h^e^FD^I^C^us^e^d^th^e^de^pos^it^pa^y^o^f^f^option²^{48 t}ⁱ^m^e^{s out}^of^3,⁰⁰^{1 “}^c^l^os^ing^s^aⁿ^{d a}^s^sⁱ^s^t^aⁿ^c^e^tr^aⁿ^s^a^c^tions^”^;
^f^r^o^m²⁰⁰⁰^thr^oug^h^A^u^g^u^s^t^1,²⁰⁰⁸^{, t}^h^e^r^e^w^e^r^e^{5 pay}^outs^o^u^{t of}⁴⁰^“^c^l^os^ing^s^a^{nd a}^s^sⁱ^s^t^aⁿ^c^e^tr^aⁿ^s^a^c^tions^,”
^http:^//www^4.f^d^ic^.g^ov^/^h^so^b/^Se^le^c^t^Rpt.a^s^p?^Entry^T^y^p⁼^30.
⁷²^{12 U}^.^S.C^.^§¹⁸²¹⁽^f⁾⁽¹⁾^.
⁷³^Uⁿ^{til t}^h^e^pa^s^s^a^g^e^of^the^H^ousⁱⁿ^g^a^{nd Ec}^o^nom^ic^Re^c^o^v^e^r^y^A^c^{t o}^f²⁰⁰⁸^,^P.L^.¹¹^0-2^89,^§¹⁶^04(a⁾^,^the^FD^{IC ha}^d
^a^u^thor^ity^{to c}^r^e^a^t^e^a^de^pos^it^na^tio^na^{l ba}^nk^but^no^c^o^r^r^e^s^p^oⁿ^dⁱ^ng^a^u^t^hor^ity^f^o^r^thrⁱ^f^t^s^.^W^{ith the}^pa^s^s^a^ge^of^tha^t^la^w^,^the^r^e
^{is a}^u^th^ority^{to c}^r^e^a^t^e^a^te^m^pora^r^y^thri^f^t^de^posi^t^ory^institutⁱ^oⁿ^w^{ith li}^m^ite^{d pow}^e^r^{s. 12 U.S.C.}¹⁸²¹^(m⁾^.^Suc^h^aⁿ
^institu^tio^{n m}^a^y^e^x^{ist f}^o^{r a}^m^a^xⁱ^m^u^m^of^t^w^o^y^e^a^r^{s unle}^{ss the}^FDIC^a^u^thor^iz^e^s^{it to}^issue^stoc^k^,^aⁿ^{d it}^subse^que^ntly
^qua^lif^ie^s^f^o^r^na^tiona^l^ba^nk^or^f^e^de^r^a^lly^c^h^a^r^te^r^e^{d thr}ⁱ^f^t^s^t^a^t^us^.
⁷⁴^T^h^{e FDI A}^c^{t b}^a^{ses d}^e^p^o^s^{it in}^s^u^ran^{ce co}^v^e^rag^e^oⁿ^th^{e o}^wⁿ^e^rshⁱ^p^rⁱ^g^h^{ts an}^d^cap^{acities in}^w^h^ich^acc^ounts^a^r^e
^m^a^inta^ine^d^{. T}^h^e^“^s^ta^nda^r^d^m^a^xⁱ^mum^de^pos^{it i}ⁿ^s^u^r^a^nc^e^a^m^ount”^is^s^e^{t a}^t^$1^00,⁰⁰⁰^pe^r^a^c^c^ount^{, pe}^{r i}ⁿ^s^titutⁱ^oⁿ^s^u^bje^c^t
^{to be}ⁱⁿ^g^a^d^juste^d^f^o^{r inf}^l^a^tion^a^f^te^{r Ma}^rc^{h 3}¹^,²⁰^10.¹²^U.^S^.^C.^§^§¹⁸²¹^(a)(1^{)(C), (}^E^{), an}^d^(F)^.^T^h^{e F}^D^{IC reg}^u^latioⁿ^s
^g^o^v^e^rⁿ^ing^de^pos^it^ins^u^r^a^nc^e^c^o^v^e^r^a^g^e^a^r^e^f^{ound a}^t^{12 C}^.^F.R^.^,^P^a^r^t³³⁰^{. T}^h^e^c^a^p^a^c^ity^{in w}^h^ic^h^a^c^c^ounts^a^r^e^he^ld^m^a^k^e^s
^{a d}ⁱ^f^f^eren^{ce i}ⁿ^d^e^p^o^sⁱ^tⁱⁿ^s^u^ran^ce^co^verag^e^.^Sⁱⁿ^g^l^e^o^wⁿ^e^rshⁱ^p^accouⁿ^t^{s and}^j^oⁱⁿ^t^acco^un^t^s^{are i}ⁿ^su^re^d^sep^a^rat^e^l^y^.^Se^e^the
^{FDIC’s e}^x^plaⁿ^a^{tions a}^t^htt^p^://w^ww^.^f^dic^.^g^o^v^/^de^p^o^sit/^de^posits^/ⁱ^nsuriⁿ^g^d^e^pos^its/ⁱ^nde^x^.^h^t^m^l^.
⁷⁵¹²^U^.^S.C.^§^§¹⁸²¹^(f⁾⁽³^{) an}^d⁽⁴^).

against the receivership.⁷⁶ Under the National Depositor Preference Statute,⁷⁷ depositor claims ⁷⁸
against the receivership are superior to all other unsecured claims against the receivership.
Neither the FDIC nor any new bank or other insured depository institution is required to
recognize as owner of a deposit account anyone other than a person whose name or interest as
owner is on the failed bank’s records if the recognition would increase the aggregate amount of ⁷⁹
insured deposits.
There is also a provision permitting the FDIC to withhold payment of “such portion of the insured
deposit of any depositor ... as may be required to provide for the payment of any liability of such
depositor to the depository institution in default or its receiver, which is not offset against a claim
due from such depository institution, pending the determination and payment of such ⁸⁰
liability....”
Depositors have 18 months to claim their deposits from the FDIC or the transferee depository
institution, provided that the FDIC has followed the specific procedures for notifying deposit
holders. After 18 months, unclaimed deposits are turned over to the appropriate state; if
unclaimed after 10 years, they revert to the FDIC. If a state refuses to accept the unclaimed
property, it will remain with the FDIC, and the depositors will be able to claim it until the ⁸¹
receivership is terminated. Thereafter, depositors’ rights will be barred.
Section 13(c) of the FDI Act provides the FDIC with discretion to provide assistance to an
institution to prevent default, to restore an institution in default to normal operations, or to deal
with conditions which threaten the stability of “a significant number of insured depository ⁸²
institutions or of insured depository institutions possessing significant financial resources.” The
assistance, which is designed to keep the institution or institutions from failing, may take the form
of loans, deposits, asset or security purchases, or assumption of the liabilities of an insured ⁸³
institution. This method of resolution protects uninsured depositors and, at least to some extent, ⁸⁴
shareholders. It was used in the 1980s, but is less likely to be used today. One reason for this is
the enactment of the least-cost resolution requirement, which was enacted with the passage of the

⁷⁶^{12 U}^.^S.C^.^§¹⁸²¹⁽^g⁾⁽¹⁾^.
⁷⁷^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹¹⁾^.
⁷⁸^A^lthoug^{h a}^d^mⁱ^nis^t^r^a^tiv^e^e^x^pe^ns^e^s^of^the^r^ecei^vershⁱ^p^h^a^{ve sen}ⁱ^o^r^s^t^at^u^s^t^o^d^e^po^si^t^o^r^cl^ai^m^s^,^b^y^p^a^yⁱⁿ^gⁱⁿ^su^red
^de^pos^it^or^c^l^aⁱ^m^s^{in its}^c^o^r^por^a^t^e^c^a^pa^cⁱ^t^y^out^of^the^de^p^o^s^{it i}ⁿ^s^u^r^aⁿ^c^e^f^{und in e}^x^c^h^aⁿ^g^e^f^o^r^a^c^l^aⁱ^m^ag^aⁱ^ns^{t the}
^recei^ver^s^hⁱ^p^,^t^h^{e F}^D^{IC ef}^fectⁱ^v^el^y^p^r^o^vⁱ^d^{es i}ⁿ^su^red^d^e^p^o^sⁱ^t^o^r^{s superi}^o^r^st^at^u^s^.
⁷⁹^{12 U}^.^S.C^.^§¹⁸²²⁽^c⁾^.
⁸⁰^{12 U}^.^S.C^.^§¹⁸²²⁽^d)^.
⁸¹^{12 U}^.^S.C^.^§¹⁸²²⁽^e⁾^.
⁸²¹²^U^.^S.C.^§^§¹⁸²³^(c)(1^)(A^),(B),^an^d^(C).
⁸³^{12 U}^.^S.C^.^§¹⁸²³⁽^c⁾⁽¹⁾^.^S^u^b^j^e^c^t^t^o^the^le^a^s^t-^c^o^s^t^r^e^s^o^luti^on^r^e^qu^ir^e^m^eⁿ^{t, the}^FD^I^C^ha^s^dis^c^r^e^tio^{n a}ⁿ^{d a}^u^t^hor^ity^to
^f^a^c^ilita^te^a^m^e^rge^r^{or c}^ons^olida^tⁱ^o^{n of}^aⁿⁱⁿ^sure^d^instit^uti^onⁱⁿ^de^f^a^ult^{or in}^da^ng^e^r^of^de^f^a^{ult w}^{ith a}ⁿ^othe^{r i}ⁿ^sure^d
^de^posit^ory^instituti^on^{, i}ⁿ^c^l^ud^ing^a^u^th^ority^{to p}^u^rc^ha^se^a^sse^{ts a}^{nd a}^ssum^e^lia^bilitie^{s of}^the^distre^sse^{d i}ⁿ^stitutⁱ^oⁿ^by
^purc^h^a^s^ing^t^h^e^a^sse^{ts a}^{nd a}^ssumⁱ^ng^the^lia^b^ilitie^{s of}^distre^sse^d^baⁿ^k^s^{. 12 U.S}^.^C.^{§ 1}⁸²³^(c^)(2)(A^).
⁸⁴^T^h^e^r^e^w^e^re^{no a}^ssistaⁿ^c^e^traⁿ^sa^c^t^ions^be^tw^e^eⁿ^Ja^nua^r^y²⁰⁰^{8 a}ⁿ^{d A}^u^g^u^{st 2}⁰⁰⁸^,^htt^p^://w^ww^4.^f^d^ic^.g^ov/hsob^/
^Se^le^c^t^R^p^t.a^s^p?^Entr^y^T^y^p⁼^{30. A}^ccor^dⁱⁿ^g^to^Mc^C^o^y^,^ope^{n i}ⁿ^s^tit^uti^oⁿ^a^s^sⁱ^s^t^aⁿ^c^e^is^the^m^e^{thod f}^a^v^o^r^e^{d by}^the^ba^nk^ing
^ind^u^stry^{, but is c}^r^itic^iz^e^d^a^s^ra^isin^g^“^f^e^a^r^{s o}^f^g^o^v^e^rn^m^e^nt^na^tiona^liz^a^tion^of^the^ba^nkⁱⁿ^g^se^c^t^or,”^a^{nd i}^s^se^eⁿ^a^s
^r^e^w^a^r^d^ing^ine^f^fⁱ^cⁱ^eⁿ^cy^a^{nd r}ⁱ^s^k^a^{nd i}ⁿ^hⁱ^bitⁱ^ng^m^a^r^k^e^t^dis^c^ipline^.^Mc^C^o^y^a^t^15.0⁵^[³^]^[^c^]^.

Federal Deposit Insurance Corporation Improvement Act of 1991.⁸⁵ Another is the elimination of ⁸⁶
previously existing favorable tax treatments. A third is a statutory prohibition on the use of the
deposit insurance fund to benefit any shareholder of failed or failing institutions, which, like the ⁸⁷
least-cost resolution requirement, may be waived to avert systemic risk. Before providing
assistance to keep a failing institution open, the FDIC must determine, among other things, that ⁸⁸
the deterioration in capital has not been the result of management abuses or incompetence.
In a P&A, a healthy bank or thrift buys some of the assets and assumes some of the liabilities of
the failed institution. There are several types of P&As, including the following:
• Basic P&A—assumption of insured deposits and purchase of cash and cash
equivalent assets (and if bid is high enough, assumption of uninsured deposits ⁸⁹
and bank premises).
• Loan purchase P&A—purchase of a portion of the loan portfolio, such as ⁹⁰
installment loans.
• Whole bank P&A—purchase of all of an institution’s assets and assumption of all ⁹¹
of its liabilities.
• Loss sharing P&A—assumption of deposit liabilities and FDIC transfer of a
fixed pool of assets to the acquirer at a discounted price with the FDIC agreeing
to share in future losses that the acquirer experiences on the fixed pool of ⁹²
assets.
P&A appears to be the leading method that the FDIC uses to resolve institutional failures.⁹³ There
is, however, what appears to be a movement away from what was once the predominant form of

⁸⁵^P^.^L^.¹⁰^2-²⁴²^.
⁸⁶^Se^c^tion¹⁴⁰¹^of^the^Fⁱ^na^nc^ia^{l I}ⁿ^s^tituti^{ons Re}^f^o^rm^{, Re}^c^o^v^e^r^y^{, a}^{nd Enf}^o^rc^e^m^eⁿ^{t Ac}^{t of}¹⁹⁸^9,^P.L^.¹⁰^1-7³^{, m}^odifⁱ^e^d
^the^spe^cⁱ^a^l^ta^x^rule^{s f}^o^{r tra}ⁿ^sa^c^tio^{ns inv}^o^lvⁱⁿ^g^f^e^de^ra^l^fⁱ^na^nc^ia^l^assi^st^an^{ce t}^o^b^aⁿ^k^{s and}^t^h^ri^f^t^{s t}^h^at^h^a^d^b^eenⁱⁿ^exi^s^t^eⁿ^ce
^f^r^o^m¹⁹⁸¹^f^o^r^thrⁱ^f^t^s^aⁿ^d¹⁹⁸⁸^f^o^r^ba^nk^s^.
⁸⁷^{12 U}^.^S.C^.^§¹⁸²¹⁽^a⁾⁽⁴⁾⁽^B⁾^.
⁸⁸^{12 U}^.^S.C^.^§¹⁸²³⁽^c⁾⁽⁸⁾^.
⁸⁹^F^o^r^aⁿ^o^v^er^vi^ew^o^f^t^h^{e b}ⁱ^ddⁱⁿ^{g pr}^o^cess,^see^FD^IC,^Re^s^o^luti^on^H^aⁿ^dbo^ok^{, a}^t^81-⁸²^{. T}^h^e^FD^I^C^m^a^r^k^ets^the^ba^nk^a^s
^wⁱ^d^e^l^y^{as p}^o^ssi^b^l^e,^m^eet^s^wⁱ^t^h^p^o^t^eⁿ^tⁱ^a^l^bⁱ^d^d^e^rs,^aⁿ^d^p^r^o^vⁱ^d^{es each}^t^h^{e w}ⁱ^t^h^t^h^{e sam}^eⁱⁿ^f^o^r^m^atⁱ^oⁿ^.^Bⁱ^d^s^coⁿ^sⁱ^s^t^o^f^t^w^o
^pa^r^t^s^:⁽¹⁾^pr^e^m^ium^f^o^r^the^f^r^aⁿ^c^h^is^e^v^a^lue^of^de^pos^its^to^be^tr^aⁿ^s^f^e^r^r^e^{d; a}ⁿ^d⁽²⁾^a^m^ount^f^o^r^aⁿ^y^or^a^{ll of}^the^ins^tit^uti^on’^s
^{assets. T}^h^{e FDIC f}ⁱⁿ^d^s^th^{at th}^e^b^a^{sic P}^&^A^b^eⁿ^e^f^{its in}^su^red^d^e^p^o^sⁱ^t^o^{rs w}^h^o^w^{ill h}^a^v^e^read^y^acc^{ess to}^th^{eir acco}^uⁿ^{ts at a}
^ne^w^ba^nk^{or thrif}^t^{, re}^d^u^c^e^s^the^F^D^{IC’s c}^o^{sts a}^{nd i}ⁿ^itia^l^ou^tla^y^s^{, a}ⁿ^{d of}^f^e^{rs the}^ne^w^ba^nk^ne^w^c^u^stom^e^r^s.^Id^.^a^t²⁴^.
⁹⁰^A^c^c^o^r^d^ing^t^o^the^FD^I^C^{, a}^l^o^aⁿ^p^u^r^c^ha^s^e^P^&^A^ha^s^a^{ll the}^be^ne^f^its^of^the^ba^sⁱ^c^P^&^A^plus^r^e^lie^vⁱ^ng^t^h^e^FD^I^C^of^“^a
^l^a^{rge n}^u^m^b^e^{r o}^f^s^m^al^l^b^a^l^aⁿ^{ce l}^o^aⁿ^{s t}^h^at^{are t}ⁱ^m^e-coⁿ^s^u^mⁱⁿ^g.^”^Id^.^a^t²⁵^.
⁹¹^T^h^is^m^e^{thod “}^[^s^]^e^l^d^o^m^pr^ov^e^s^to^be^the^le^a^s^{t c}^o^s^t^m^e^{thod in}^c^o^m^p^a^r^is^{on t}^o^o^t^he^r^ty^pe^s^of^r^e^s^o^lutioⁿ^s^.”^FD^I^C^,
^Re^s^o^luti^{on H}^aⁿ^d^b^ook^a^t^27-²⁸^{, ht}^tp://w^ww^.^f^dic^.^g^o^v^/^ba^nk^/^h^istoric^a^l/re^s^ha^ndb^ook^/ⁱ^nde^x^.^htm^l^.
⁹²^In^t^h^{e t}^y^pⁱ^cal^agre^e^m^en^t^,^t^h^{e F}^D^I^C^{agrees t}^o^ab^so^rb⁸⁰^p^e^rcen^t^o^f^t^h^{e cred}ⁱ^t^l^o^{ss o}ⁿ^co^mm^erci^al^l^o^an^{s an}^d^real^est^a^t^e
^loaⁿ^s.^Id^{. a}^t³⁰^.
⁹³^Ac^c^o^r^dⁱⁿ^g^to^M^c^C^o^y:
^T^h^{e F}^D^{IC gen}^e^ral^l^y^f^a^vo^{rs p}^u^r^{chase an}^d^assu^m^p^tⁱ^oⁿ^agree^m^en^t^s^o^v^{er l}ⁱ^q^uⁱ^d^a^tⁱ^oⁿ^b^ecau^se^P^&^A^s^p^r^{eserve t}^h^{e go}ⁱⁿ^g
^c^onc^e^r^{n v}^a^lue^of^ba^nk^f^r^aⁿ^c^h^is^e^s^{, r}^e^duc^e^dis^r^upti^oⁿ^to^de^p^o^s^itor^s^a^{nd c}^aⁿ^mⁱ^nimⁱ^z^e^pay^outs^f^r^o^m^the^de^pos^it^ins^u^r^a^nc^e
^f^{und. I}ⁿ^the¹⁹^80s^a^{nd e}^a^r^ly¹⁹⁹⁰^s^{, how}^e^v^e^r^{, thos}^e^a^g^r^e^em^eⁿ^ts^c^a^m^e^unde^r^fⁱ^r^e^b^ecau^{se t}^h^ey^w^e^{re t}^y^pⁱ^cal^l^y^st^ru^ct^u^r^ed
^{to e}^x^te^{nd f}^u^ll^pr^ote^c^tⁱ^on^to^un^ins^u^r^e^{d de}^p^o^s^itor^s^a^{nd g}^e^ne^r^a^{l c}^r^e^d^it^o^r^s^,^the^r^e^b^y^r^e^duc^ing^theⁱⁿ^c^eⁿ^tiv^e^s^of^thos^e
⁽^c^onti^nue^d.^..)

P&A, transferring all deposit liabilities (insured and uninsured) to an acquirer.⁹⁴ This may be the ⁹⁵
result of the least-cost resolution test combined with the depositor preference requirement.
As receiver of a failed institution, the FDIC is responsible for settling claims against the
institution. The funds for settling creditors’ claims are the proceeds from the sale and liquidation
of the institution’s assets. Creditors are notified that they must present their claims within a ⁹⁶
certain time frame, which may not be less than 90 days from the date of the notice. Within 180
days of receiving a claim, the FDIC must notify the claimant of whether or not it will allow the ⁹⁷
claim. The FDIC has authority to disallow claims “not proved to the satisfaction of the ⁹⁸⁹⁹
receiver.” When a claim has been disallowed, the claimant has 60 days to seek administrative ¹⁰⁰
or judicial review or the claim is deemed disallowed.
Whatever resolution method the FDIC uses, including the establishment of a bridge depository
institution, its liability to creditors is limited to what each would have received had the institution

^(...c^on^tin^ue^d)
^credⁱ^t^o^{rs t}^o^exert^market^dⁱ^sci^p^lⁱⁿ^{e o}ⁿ^b^aⁿ^k^s.^In^res^p^on^{se t}^o^t^h^at^cri^tⁱ^cⁱ^s^m^,^t^h^{e F}^D^{IC h}^a^{s cu}^rt^ai^l^e^d^t^h^e^co^{verage a}^f^f^o^rd^ed
^by^s^o^m^e^pur^c^h^a^s^e^a^{nd a}^s^s^u^m^p^tio^{n a}^g^r^e^em^eⁿ^ts^{to pr}^o^t^e^c^t^ins^u^r^e^{d d}^e^pos^itor^s^a^l^one^.
^Mc^Coy^a^t^{§ 15.}⁰⁵^[3^][^a^]⁽ⁱ^nte^r^na^l^c^ita^tions^om^itte^d).
⁹⁴^A^c^co^rdⁱⁿ^g^t^o^th^e^FDIC’s^Re^p^o^rt^{of B}^ank^an^{d T}^h^{rift F}^a^il^ure^s^{, f}^r^om¹⁹⁸⁰^{to A}^u^g^u^s^t¹^,²⁰⁰⁸^t^h^e^r^e^w^e^r^e^{: 17}⁸
^re^soluti^{ons i}ⁿ^v^o^lv^ing^the^traⁿ^sf^e^r^of^som^e^{or a}^{ll de}^p^o^sits,^c^e^r^taⁱⁿ^ot^he^{r lia}^bili^tie^{s a}ⁿ^d^som^e^{or a}^{ll a}^sse^{ts; 1,}⁴²^{7 w}^h^e^r^e
^ins^u^r^e^{d a}^nd^un^ins^u^r^e^{d de}^pos^its^w^e^r^e^a^s^s^u^m^e^{d; a}^{nd 1}^{31 w}^h^e^r^e^on^ly^ins^u^r^e^d^de^p^o^s^its^w^e^r^e^a^s^s^u^m^e^{d. C}^o^m^p^a^r^a^b^le^fⁱ^g^u^r^e^s
^f^o^r^the^pe^rⁱ^o^d^f^r^om²⁰⁰⁰^thr^oug^h^A^u^g^u^s^t^{1, 2}⁰⁰⁸^a^r^e^:⁴⁰^t^o^ta^{l r}^e^s^o^l^u^tio^ns^;^{1 inc}^l^ude^{d the}^tr^aⁿ^s^f^e^r^of^s^o^m^e^or^a^ll
^de^posits,^c^e^r^ta^{in o}^t^he^{r lia}^bilitie^s,^a^{nd som}^e^{or a}^{ll a}^sse^{ts; 10}^inc^l^ude^{d the}^traⁿ^sf^e^r^of^insure^{d a}ⁿ^d^uⁿⁱⁿ^sure^{d de}^p^o^sits;²³
^inc^l^u^d^e^d^tr^aⁿ^s^f^e^r^of^uni^ns^ur^e^d^de^pos^its^{. C}^o^m^p^a^r^a^b^le^fⁱ^g^u^r^e^s^f^o^r^the^s^e^v^e^{n f}^a^ilur^e^s^durⁱⁿ^g^f^r^om^Ja^nua^r^y^{1 thr}^oug^h
^A^u^g^u^s^t^{1, 2}⁰⁰⁸⁽^e^x^c^ludi^ng^I^ndy^Ma^c^B^a^nk^w^h^ic^{h w}^a^s^{in c}^ons^e^r^v^a^tor^s^{hip a}^s^of^A^u^g^u^s^t²⁰⁰⁸⁾^a^r^e^:^{0 tr}^aⁿ^s^f^e^r^s^o^f^s^o^m^e^or
^a^{ll de}^posⁱ^t^s^,^e^t^c^.^;^{4 a}^s^s^u^m^p^tions^o^f^a^{ll de}^pos^its^{; a}ⁿ^d^{3 a}^s^s^u^m^p^tions^of^only^ins^u^r^e^d^de^pos^its^{. FD}^I^C^{, B}^a^nk^a^{nd T}^h^rⁱ^f^t
^Fa^ilure^Re^por^t,^http^://w^ww^4.^f^d^ic^.g^ov^/hsob/^Se^le^c^t^Rpt.a^s^p?^Entry^T^yp=^30.
⁹⁵^Se^e^B^lis^s^&^K^a^uf^m^a^{n a}^t¹⁶⁷^{, n}^.⁸⁰^.
⁹⁶^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽³⁾⁽^B⁾^.^C^r^e^dⁱ^t^or^s^w^{ho a}^r^e^s^u^ing^t^h^e^ins^t^itutⁱ^oⁿ^a^r^e^a^l^s^o^s^ubje^c^t^t^o^th^is^r^e^qu^ir^e^m^{ent t}^o^pr^ov^ide^t^h^e
^F^D^{IC w}ⁱ^t^hⁿ^o^tⁱ^{ce an}^d^p^r^oo^f^o^f^t^h^ei^{r cl}^ai^m^,^gi^viⁿ^g^t^h^{e F}^D^{IC t}^h^e^o^p^p^o^r^t^uⁿⁱ^t^y^t^o^{seek a st}^a^y^o^f^t^h^{e p}^r^oceedⁱⁿ^{g u}ⁿ^d^e^{r 1}²
^U^.^S.C^.^§¹⁸²¹⁽^d⁾⁽¹²⁾^.
⁹⁷^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽⁵⁾⁽^A⁾⁽ⁱ⁾^.
⁹⁸^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽⁵⁾⁽^D⁾⁽ⁱ⁾^.
⁹⁹^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽⁷⁾⁽^A⁾^.^A^d^mⁱ^nis^t^r^a^tiv^e^r^e^vⁱ^ew^is^s^ubje^c^t^to^the^judⁱ^cⁱ^a^l^r^e^vⁱ^ew^pr^ov^is^ions^of^the^f^e^de^r^a^l
^A^d^mⁱⁿⁱ^st^ratⁱ^v^{e P}^r^o^cedu^r^{e A}^c^t^,^meanⁱⁿ^{g t}^h^at^fⁱⁿ^a^l^agen^cy^actⁱ^oⁿ^ma^y^b^e^ap^p^eal^ed^on^gro^uⁿ^d^s^s^p^eci^fⁱ^edⁱⁿ^t^h^at
^le^gⁱ^s^l^a^tion.^{5 U}^.^S.C^.^§^§⁷⁰^1-⁷^06.
¹⁰⁰^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽⁶⁾⁽^A⁾^.

been liquidated.¹⁰¹ To the extent that funds are available, the FDIC as receiver will pay all claims
of the same class on a pro rata basis.
In a receivership, secured claims take precedence over any unsecured claims and are to be paid to
the extent of the security. Any liability beyond what is secured is handled as an unsecured ¹⁰²
claim. The FDI Act mandates depositor preference, which means that depositors’ claims,
including those of the FDIC as subrogee of the insured depositors whom it has made whole, have
priority over all other unsecured claims, except those involving administrative expenses of the ¹⁰³
receivership. The FDI Act specifies the order in which uninsured and unsecured claims are to ¹⁰⁴
be discharged, i.e., paid, from the receipts of the liquidation. The statute specifies the following ¹⁰⁵
priority for payment of unsecured claims that are proved to the satisfaction of the receiver:
• Administrative expenses of the receivership.
• Deposit liabilities.
• Any other general or senior liability.
• Any obligation subordinated to depositors or general creditors which is not an
obligation owed to shareholders as shareholders.
• Obligations owed to shareholders arising as a result of their status as ¹⁰⁶
shareholders.
One of the effects of the depositor preference requirement is that, in combination with the least-
cost resolution requirement, it limits the FDIC’s resolution options. Prior to depositor preference,
when deposits were paid on the same pro-rata basis as other unsecured claims, the FDIC’s
reimbursement from a deposit payoff was likely to be less than it would be under today’s rule that
requires all deposit claims (including that of the FDIC as subrogee for the insured deposits that it
has paid) have to be paid off before any other unsecured claims other than the administrative ¹⁰⁷
expenses of the receivership.

¹⁰¹^{12 U}^.^S.C^.^§¹⁸²¹⁽ⁱ⁾⁽²⁾^.
¹⁰²^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹¹⁾⁽^A⁾^.
¹⁰³^{12 U}^.^S.C^.^§¹⁸²¹⁽^d)⁽¹¹⁾^.
¹⁰⁴^Sta^t^e^la^w^{is pre}^e^m^p^te^{d “}^e^x^c^e^p^{t to the}^e^x^te^nt^of^inc^onsis^te^nc^y^,^”^wⁱ^{th i}ⁿ^c^onsiste^nc^ie^s^de^te^rm^ine^d^by^t^h^e^{FDIC, a}ⁿ^d
^s^ubje^c^t^to^ju^dicⁱ^a^l^r^e^vⁱ^e^w^unde^r^th^e^judicⁱ^a^l^r^e^vⁱ^e^w^pr^ov^is^ions^of^the^f^e^de^r^a^l^A^d^mⁱ^nis^t^r^a^tiv^e^P^r^oc^e^d^ur^e^A^c^{t (}^A^P^A⁾^.¹²
^U^.^S.C^.^{§ 1}⁸²¹⁽^d⁾⁽¹¹⁾⁽^B⁾^.^T^h^e^ju^dⁱ^cⁱ^a^l^r^e^vⁱ^ew^pr^ov^is^ions^of^the^A^P^A^a^r^e^f^{ound a}^t^{5 U}^.^S^.^C^.^§^§⁷⁰^2-⁷^06.
¹⁰⁵^{12 C}^.^F.R^.^§³⁶^0.^3.
¹⁰⁶^{12 U}^.^S.C.^§^§¹⁸²¹^(d)(^11)(A^{)(i) -}^(v^{). If}^a^c^o^m^m^only^c^ontro^lle^{d i}ⁿ^s^u^re^{d de}^posit^ory^instituti^on^{, i.e}^.^,^oⁿ^eⁱⁿ^the^sa^m^e
^hol^ding^c^o^m^p^aⁿ^y^,^ha^{s c}^ontrib^u^te^d^{to a}ⁿ^{FDIC a}^ssistaⁿ^c^e^pa^c^k^a^g^e^{to the}ⁱⁿ^stitutⁱ^oⁿ^w^h^eⁿ^{it w}^a^{s in da}ⁿ^g^e^{r of}^de^f^a^{ult or}
^ha^{d be}^eⁿ^re^qui^re^{d by}^the^{FDIC t}^o^pa^y^a^portion^of^the^l^o^{ss to}^the^F^D^{IC c}^a^u^se^{d by}^the^instit^u^tio^{n’s de}^f^a^{ult, its c}^l^aⁱ^m^w^ill
^ha^v^e^priority^ov^e^r^sha^r^e^holde^{r c}^l^aⁱ^m^s^a^{nd c}^l^aⁱ^m^s^of^a^f^f^ilia^te^{s o}^f^the^institu^tio^{n (i}^nc^lu^ding^t^h^e^h^o^ldiⁿ^g^c^o^m^p^aⁿ^y^a^nd
^othe^r^de^pos^it^ory^ins^titutⁱ^ons⁾^b^u^t^w^{ill be}^s^ubor^dina^te^{d to}^de^p^o^sⁱ^t^o^r^c^l^aⁱ^m^s^(e^xc^e^p^{t f}^o^{r de}^pos^its^he^{ld f}^o^{r a}^f^f^ilia^tes^of^the
^institu^tio^{n) a}ⁿ^{d t}^o^se^c^u^re^d^oblig^a^t^ions^of^a^f^f^ilia^te^{s. 12 U.S.C.}^§¹⁸¹⁵^(e^)(2)(C).
¹⁰⁷^Se^e^Sk^e^e^l^a^t^n.¹⁷^5.

One of the superpowers¹⁰⁸ given to the FDIC, both as receiver and in its corporate capacity, is the
power to defeat claims against its interests in assets it has acquired in a receivership or through
open institution assistance. To prevail on a claim that tends to defeat or diminish the FDIC’s
interest in such an asset, the claimant must show that there was a written agreement, executed
contemporaneously with the institution’s acquisition of the assets, approved by the institution’s ¹⁰⁹
board of directors or its loan committee, and continuously reflected on the institution’s books.

One of the biggest issues with OFHEO’s ability to help a financially troubled Fannie or Freddie
was the dearth of explicit statutory authority. This section addresses the powers that were
expressly provided to OFHEO and the legal uncertainty that would have arisen had OFHEO taken
measures not expressly provided for in the code as a way to help a failed GSE.
Prior to the effective date of P.L. 110-289, there was statutory only for the appointment of a ¹¹⁰
conservator for a troubled Fannie or Freddie, not a receiver. The Director of OFHEO could
appoint a conservator if he or she determined that there was no other satisfactory alternative
available and that
• “the enterprise is not likely to pay its obligations in the normal course of
business”;
• covering losses “would deplete substantially all of its core capital”¹¹¹ and would
not likely be able to build the core capital back up in a reasonable amount of
time;

¹⁰⁸^“^S^upe^rp^ow^e^r^s”^{is the}^te^rm^use^d^{for the}^to^{ols a}^v^a^ila^ble^to^t^h^e^FDIC^{to de}^a^l^w^{ith i}ⁿ^solv^eⁿ^{t de}^p^o^sitory^institutⁱ^oⁿ^s,
^s^t^em^mⁱ^ng^f^r^om^long^-^s^ta^nding^ju^dⁱ^cⁱ^a^l^de^cⁱ^sⁱ^ons^aⁿ^{d f}^r^om^le^gⁱ^s^l^a^{tion e}ⁿ^a^c^t^e^d^f^o^llowⁱ^ng^the^t^h^rⁱ^f^t^c^r^is^is^of^the¹⁹^80s^.
^T^h^{ese p}^o^w^ers,ⁱⁿ^so^m^e^re^sp^ect^,^exceed^t^h^{e au}^t^h^o^rⁱ^t^y^o^f^{a b}^aⁿ^k^ru^p^t^c^y^co^u^r^t^.^T^h^eyⁱⁿ^cl^u^d^e^t^h^e^p^o^w^{er t}^o^reo^r^ganⁱ^{ze t}^h^e
^ins^titu^tio^{n, t}^o^s^e^{ll i}^t^s^a^s^s^e^ts^{, a}^{nd r}^e^pudia^t^e^c^e^r^ta^{in c}^l^aⁱ^m^s^{, w}^{ith little}^judⁱ^cⁱ^a^l^ov^e^r^sⁱ^g^h^t.^Se^e^{, e}^.^g^.^,^T^h^o^m^a^s^{C. Ba}^x^t^e^r^{, J}^r^.,
^Jo^y^c^{e M}^.^Han^s^en^,^and^Jo^seph^H.^S^o^mm^er,^{Two Che}^e^{rs for Te}^rritorⁱ^a^lity^{: A}ⁿ^Essay^on^Inte^rn^ati^oⁿ^a^l^Bank^Iⁿ^solv^eⁿ^c^y
^Law^,^{78 A}^m^{. B}^a^nk^r^.^L^.^J^.^57,^{72 (}²⁰⁰⁴⁾^{; R}^obe^r^t^W^.^N^o^r^c^r^o^s^s^,^J^r^.,^T^h^e^Ba^nk^Iⁿ^s^o^lv^eⁿ^c^y^G^a^m^e^:^FD^I^C^Supe^r^pow^e^r^s^,^the
^D^’^O^e^nc^h^D^o^c^t^rⁱ^ne^{, an}^d^Fe^de^r^a^{l C}^o^m^m^{on Law}^,¹^{03 B}^a^nk^ing^L^.^J^.³¹⁶^{, 3}²⁸⁽¹⁹⁸⁶⁾^{; Fr}^e^d^G^a^lv^e^s^,^Mi^g^h^t^D^o^{es No}^t^Ma^ke
^Right^:^T^h^e^C^a^ll^for^Re^f^o^r^m^of^the^Fe^de^r^a^{l G}^o^v^e^r^nm^eⁿ^t’^s^D^’^O^e^nc^h^,^D^uhm^e^a^nd¹²^U^.^S.C^.¹⁸²³⁽^e⁾^Su^pe^r^pow^e^r^sⁱⁿ
^Faile^{d Ba}^nk^Liti^ga^tioⁿ^,⁸⁰^Minⁿ^.^L^.^R^e^v^.¹³²³⁽¹⁹⁹⁶⁾^{; R}^obe^r^t^W^.^N^o^r^c^r^o^s^s^,^J^r^.,^T^h^{e B}^aⁿ^k^Iⁿ^so^l^ven^c^y^Ga^{me: F}^D^IC
^Supe^r^pow^e^r^s^,^the^D^’^O^e^nc^{h D}^o^c^t^rⁱ^ne^{, a}ⁿ^d^Fe^de^r^a^{l C}^o^m^m^o^{n L}^a^w^,¹^{03 B}^a^nkⁱⁿ^g^L^.^J^.³¹^6,^n.¹³^{7 (}¹⁹⁸⁶⁾^.
¹⁰⁹^{12 U}^.^S.C^.^§¹⁸²³⁽^e⁾^.^T^o^s^o^m^e^e^x^te^{nt, t}^h^is^c^o^difⁱ^e^s^a^{nd e}^x^pa^nds^up^{on t}^h^e^c^o^m^m^{on la}^w^doc^tr^ine^e^m^ana^ting^f^r^om^the
^Supr^e^m^e^C^our^t’^s^de^cⁱ^sⁱ^oⁿⁱⁿ^D^’^O^e^nc^{h, D}^u^hm^e^v^.^FD^I^C^,³¹^{5 U}^.^S^.⁴^{47 (}¹⁹⁴²⁾^{. U}ⁿ^de^r^the^hol^di^ng^of^tha^t^c^a^s^e^,^the
^FD^I^C^’^s^a^c^tions^t^o^c^o^lle^c^t^on^no^te^s^m^a^y^{not be}^de^f^e^a^t^e^d^b^y^de^f^e^ns^es^ba^s^e^{d on}^s^e^c^r^e^t^sⁱ^de^a^g^r^e^em^eⁿ^ts^.^Subs^e^q^ue^ntly^{, the}
^doc^trⁱⁿ^e^ha^s^be^eⁿ^e^x^te^nde^{d t}^o^c^o^v^e^r^“ⁱ^nnoc^eⁿ^t^u^nde^r^s^taⁿ^d^ing^s^a^b^o^u^t^r^e^g^u^la^r^ba^nk^tr^aⁿ^s^a^c^tio^ns^tha^t^ne^v^e^r^ha^ppe^ne^{d t}^o
^be^r^e^c^o^r^d^e^d^,”^a^s^w^e^{ll a}^s^f^r^a^uduleⁿ^{t a}^r^r^a^ng^em^eⁿ^ts^{. Mc}^C^o^y^a^t^16.04^[¹^]^.^T^h^e^r^e^a^l^s^o^a^r^e^s^t^a^t^uto^r^y^ex^em^ptio^ns^f^r^om^the
^c^onte^m^por^aⁿ^e^ous^e^x^e^c^u^tio^{n r}^e^q^uⁱ^r^em^eⁿ^t—^a^g^r^eem^eⁿ^ts^law^f^ully^c^o^lla^te^r^a^liz^ing^de^pos^its^or^othe^r^l^o^aⁿ^s^by^g^o^v^e^rⁿ^m^e^nta^l
^eⁿ^titie^s^,^ba^nk^ruptc^y^e^s^ta^te^f^unds^,^e^x^te^ns^ions^of^c^r^e^d^{it f}^r^om^Fe^de^ra^{l H}^o^m^e^L^o^aⁿ^Ba^nk^s^a^{nd Fe}^de^ra^{l R}^e^s^e^rve^Ba^nk^s^a^nd
^“^qua^lif^ie^{d f}ⁱ^na^nc^ia^{l c}^ontr^a^c^t^s^.^”¹²^U^.^S.C^.^§¹⁸²³⁽^e⁾⁽²⁾^.
¹¹⁰^For^m^e^r^l^y^{12 U}^.^S.C^.^§^§⁴⁶¹⁶^—⁴⁶²¹⁽^r^e^pe^a^l^e^d^by^P^.^L^.¹¹^0-²⁸⁹⁾^.
¹¹¹^C^a^pita^liz^a^tio^ns^s^t^a^nda^r^d^s^w^e^r^e^de^fⁱ^ne^{d a}^t^{12 U}^.^S.C^.^§⁴⁶^14.^P^.^L^.¹^10-²⁸^{9 a}^m^e^nds^the^c^a^p^ita^{l r}^e^q^u^ir^e^m^eⁿ^ts^.^P^.^L^.
¹¹⁰^-2^89,^Su^btitle^C^.

• the enterprise hid “books, papers, records, or assets of the enterprise that are
material to the discharge of the Director’s responsibilities ... or refused ... to
submit such [materials] for inspection to the Director upon request”; or
• there exists a willful violation of a cease and desist order.¹¹²
The conservator could have been the Director, any agency of the government, or any disinterested ¹¹³
person that had the knowledge and expertise necessary to run the GSEs. A review of the
legislative history of this provision offered little by way of elaboration as to whom, other than the
Director of OFHEO, Congress contemplated serving as conservator. Within 20 days of a
conservator’s appointment, Fannie and Freddie had a right to contest the appointment in federal ¹¹⁴
district court. Pursuant to the law in effect before enactment of P.L. 110-289, a conservatorship
would continue until the Director deemed that its termination would be “in the public interest and
[would] be safely accomplished” or until the enterprise reached its minimum capital ¹¹⁵
requirements.
Conservators were granted “all the powers of the shareholders, directors, and officers of the ¹¹⁶
enterprise....” The prior law also gave conservators the authority to “avoid any security interest
taken by a creditor with the intent to hinder, delay, or defraud the enterprise or [its] ¹¹⁷
creditors....” Finally, a conservator had the ability to enforce certain contracts and seek a ¹¹⁸
temporary stay of judicial proceedings to which the enterprise or the conservator was a party.
That was basically the extent of the conservator’s express statutory authority. This authority was
far less expansive, and it provided far less guidance than that bestowed upon the FDIC to deal
with troubled banks and thrifts. Some of the more notable differences are: (1) OFHEO was
limited exclusively to conservatorship; (2) the circumstances in which a conservator could be
appointed arguably would only arise when Fannie or Freddie was in a financial condition so dire
that the only hope of saving the institution was with federal funding; and (3) a conservator for
Fannie or Freddie had no authority to reorganize debt (i.e., pay only parts of debts or restructure
payments over a longer period of time than the existing pay schedule).
The dearth of guidance provided was also troublesome. For example, the law prior to P.L. 110-
289 did not list the priority of unsecured creditors and even did not make clear who could serve as
conservator. Consequently, a conservator for Fannie or Freddie would have had difficulty
returning an enterprise back to solid financial footing using only the powers it was explicitly
given, and any actions taken outside of its explicit authority would have been wrought with legal
uncertainty, which could have undermined the effectiveness of taking such actions.

¹¹²^For^m^e^r^l^y^{12 U}^.^S.C^.^§⁴⁶¹⁹⁽^a⁾⁽¹⁾⁽^r^e^pe^a^l^e^d^by^P^.^L^.¹¹⁰^-²⁸⁹⁾^.^T^h^e^Dⁱ^r^e^c^t^or^a^l^s^o^c^o^u^l^d^ha^v^e^a^ppoi^nte^d^a^c^ons^e^r^v^a^tor
^upo^{n a}^m^a^jor^ity^v^o^te^b^y^aⁿ^eⁿ^te^r^p^rⁱ^s^e^’^s^B^o^a^r^{d of}^Dⁱ^r^e^c^t^or^s^.^F^o^r^m^e^r^l^y^{12 U}^.^S.C^.^{§ 4}⁶¹⁹⁽^a⁾⁽²⁾⁽^r^e^pe^a^l^e^d^by^P.L^.¹¹^0-
²⁸⁹⁾^.
¹¹³^For^m^e^r^l^y^{12 U}^.^S.C^.^§⁴⁶¹⁹⁽^a⁾⁽⁴⁾⁽^r^e^pe^a^l^e^d^by^P^.^L^.¹¹⁰^-²⁸⁹⁾^.
¹¹⁴^For^m^e^r^l^y^{12 U}^.^S.C^.^§⁴⁶¹⁹⁽^b)⁽^r^e^p^e^a^l^e^d^by^P^.^L^.¹^10-²⁸⁹⁾^{. “}^A^de^cⁱ^sⁱ^on^of^the^Dⁱ^r^e^c^t^or^t^o^a^p^poi^{nt a}^c^ons^e^r^v^a^tor^m^a^y
^b^e^set^asi^d^{e .}^.^.^on^l^yⁱ^f^t^h^{e co}^u^r^t^fⁱⁿ^d^s^t^h^at^t^h^{e d}^eci^si^on^w^a^{s arb}ⁱ^t^r^ary^,^cap^ri^ci^o^u^s^,^an^abu^s^{e o}^f^dⁱ^scretⁱ^o^n,^o^r^o^t^h^e^rwⁱ^s^{e n}^o^t
ⁱⁿ^acco^rd^an^{ce w}ⁱ^t^h^app^lⁱ^cab^l^e^l^a^w^.^{” Ju}^dⁱ^ci^al^revi^ew^w^a^{s n}^o^t^p^r^o^vⁱ^d^ed^w^h^en^{a co}ⁿ^s^ervat^o^{r i}^s^ap^poⁱⁿ^t^e^d^wⁱ^t^h^t^h^{e con}^s^en^t
^o^f^a^m^a^j^o^ri^t^y^o^f^an^en^t^e^rp^ri^{se’s Bo}^ard^o^f^Di^rect^o^r^s.
¹¹⁵^For^m^e^r^l^y^{12 U}^.^S.C^.^§⁴⁶¹⁹⁽^e⁾⁽^r^e^pe^a^l^e^d^by^P^.^L^.¹¹⁰^-²⁸⁹⁾^.
¹¹⁶^For^m^e^r^l^y^{12 U}^.^S.C^.^§⁴⁶²⁰⁽^a⁾⁽^r^e^pe^a^l^e^d^by^P^.^L^.¹¹⁰^-²⁸⁹⁾^.
¹¹⁷^For^m^e^r^l^y^{12 U}^.^S.C^.^§⁴⁶²⁰⁽^b)⁽^r^e^p^e^a^l^e^d^by^P^.^L^.¹^10-²⁸⁹⁾^.
¹¹⁸^For^m^e^r^l^y^{12 U}^.^S.C^.^§^§⁴⁶²⁰⁽^d⁾^—⁽^e⁾⁽^r^e^pe^a^l^e^d^by^P^.^L^.¹^10-²⁸⁹⁾^.

The Housing and Economic Recovery Act of 2008 alleviates many of the limitations with
OFHEO’s conservatorship powers. Among other things, it largely revamped the statutory
authority for handling a financially troubled Fannie or Freddie by closely modeling the FDI Act
and giving the FHFA largely the same powers over a failed Fannie and Freddie that the FDIC has
over failed banks and thrifts, including the authority to act as a receiver. The following sections
highlight some of the more important differences between the FDI Act and P.L. 110-289 and
briefly describe and cite those provisions that are similar.
The differences between the FDIC’s authority and that of the FHFA primarily seem to stem from
the variant roles performed by the two types of institutions being regulated. One of the main goals
of a receiver or conservator of a failed bank or thrift is to protect its FDIC-insured deposits. As
Fannie and Freddie are not lenders and do not hold deposits, the FHFA, as conservator or
receiver, does not have to be concerned about FDIC-insured deposits. The lack of insured
deposits held by Fannie and Freddie appears to account for the majority of the differences in the
two regulatory regimes. For example, the FHFA does not have to adhere to a least-cost
requirement like that imposed by the FDI Act. Consequently, the resolution strategies for dealing
with a failed Fannie or Freddie likely would differ from the insured deposit focus of the strategies
generally applied for failed banks and thrifts.
Another major difference is the fact that the Director of the FHFA, as Fannie and Freddie’s sole
regulator, is granted the exclusive authority to appoint a conservator or receiver over the
enterprises. The authority to appoint a conservator or receiver over a failed bank or thrift, on the
other hand, may rest in a state chartering authority, one of the multiple federal regulators, or the
FDIC, depending on the type of bank or thrift and its charterer. Additionally, there are situations
in which the Director of the FHFA must appoint the FHFA as receiver over Fannie or Freddie,
whereas the appointment of a receiver over a failed bank or thrift is always discretionary.
The discretionary grounds for appointing the FHFA as conservator or receiver over Fannie or
Freddie are virtually identical to those provided to the FDIC for thrifts and banks. The only
significant difference is that P.L. 110-289 does not include the termination of deposit insurance ¹¹⁹
coverage as a ground for appointment, as it is inapplicable to the enterprises.
In addition to the discretionary grounds, P.L. 110-289 does include two mandatory grounds for
the appointment of the FHFA as receiver. One mandatory ground is if the enterprise’s debts
exceeds its assets during the previous 60 days. The other is if the enterprise generally has not
been “paying the debts ... (other than debts that are the subject of a bona fide dispute) as such

¹¹⁹^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^a⁾⁽³⁾^,^a^s^a^m^e^nde^d^by^P^.^L^.¹^10-²⁸^{9 §}¹¹⁴⁵⁽^a⁾^.

debts become due.”¹²⁰ If the FHFA is appointed conservator or receiver under either the
discretionary or mandatory grounds, the affected enterprise may challenge the appointment in ¹²¹
court.
Much like the FDI Act, the Housing and Economic Recovery Act provides the FHFA with a wide
array of powers when acting as either a conservator or a receiver. Supplementary powers are also
provided for each of these capacities. P.L. 110-289 makes clear the powers assigned to the FHFA
as a conservator or receiver are not exclusive, but are in addition to any other powers conferred
on conservators or receivers of the enterprises and that, in exercising its conservatorship or
receivership authority it “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 the [FHFA’s] rights, powers, and ¹²²
privileges.”
The FHFA, just like the FDIC, is provided broad rulemaking authority to promulgate any
“regulations [] the Agency determines to be appropriate regarding the conduct of conservatorships ¹²³
and receiverships.”
The general and incidental powers under the Housing and Economic Recovery Act of 2008 are
virtually the same as those granted under the FDI Act. The powers provided the FHFA as
conservator or receiver are broad in scope. As successor to the institution, the FHFA is authorized
to operate the institution and endowed with “all rights, titles, powers, and privileges of the
regulated entity, and of any stockholder, officer, or director of the regulated entity” and may
collect all the obligations due the institutions, perform its duties, and preserve and conserve its ¹²⁴
assets. In addition to the explicit powers granted to FHFA as conservator or receiver, P.L. 110-

289 contains a provision delegating to the Corporation as receiver or conservator “such incidental ¹²⁵

powers as shall be necessary to carry out such powers.”
A few of the explicit powers granted to the FDIC are not included in P.L. 110-289. One is the
ability to merge an enterprise with another institution. Another is the ability to use private sector

¹²⁰^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^a⁾⁽⁴⁾^,^a^s^a^m^e^nde^d^by^P^.^L^.¹^10-²⁸^{9 §}¹¹⁴⁵⁽^a⁾^.
¹²¹^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^a⁾⁽⁵⁾^,^a^s^a^m^e^nde^d^by^P^.^L^.¹^10-²⁸^{9 §}¹¹⁴⁵⁽^a⁾^.
¹²²^P^.^L^.¹⁰^2-⁵⁵⁰^§^§¹³⁶⁷⁽^a⁾⁽⁷⁾^,¹³⁶⁷⁽^b⁾⁽²⁾^{, a}^s^a^m^e^nde^{d by}^P^.^L^.¹^10-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹²³^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽¹⁾^,^a^s^a^m^e^nde^d^by^P^.^L^.¹^10-²⁸^{9 §}¹¹⁴⁵⁽^a⁾^.
¹²⁴^P^.^L^.¹⁰^2-⁵⁵⁰^§^§¹³⁶⁷⁽^b⁾⁽²⁾⁽^A⁾^-⁽^D⁾^,^a^s^a^m^e^nde^{d by}^P^.^L^.¹¹^0-²⁸⁹^{§ 1}¹⁴⁵⁽^a⁾^.
¹²⁵^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽²⁾⁽^J⁾^,^a^s^am^e^nde^{d by}^P^.^L^.¹^10-²⁸⁹^{§ 1}¹⁴⁵⁽^a⁾^.

services. Finally, the FHFA is not given express authority to contract with state housing finance
agencies to sell the enterprise’s mortgage related assets. The FHFA also is explicitly prohibited ¹²⁶
from repudiating contracts with the Treasury (this provision is not included in the FDI Act).
Among the substantially similar explicit powers granted by P.L. 110-289 are the ability to:
• Transfer the enterprise’s assets.¹²⁷
• Pay the enterprise’s valid obligations.¹²⁸
• Issue subpoenas.¹²⁹
• Obtain temporary stays of judicial actions in which the enterprise is a party.¹³⁰
• Exercise rights of the enterprise with respect any appealable judgment, including ¹³¹
removal to federal court.
• Avoid certain fraudulent transfers made with the intent to “hinder, delay, or ¹³²
defraud the regulated entity.”
• Repudiate contracts (with exception of loans from the Federal Home Loan
Banks, Federal Reserve Bank, or the Treasury) or leases entered into by the ¹³³
enterprise, under certain conditions.
• Secure court-ordered attachment, i.e., asset freeze, of any of the assets acquired ¹³⁴
or liabilities assumed by the FHFA as conservator or receiver.
• Enforce most of the enterprise’s contracts entered.¹³⁵
• Bring an action to hold a director or officer of an enterprise personally liable for ¹³⁶
gross negligence.
Just as is the case under the FDI Act, the Housing and Economic Recovery Act of 2008 provides
special statutes of limitation for actions brought by the FHFA as receiver or conservator. For

¹²⁶^P^.^L^.¹⁰^2-⁵⁵⁰^§^§¹³⁶⁷⁽^b⁾⁽⁵⁾⁽^D⁾^,⁽^b⁾⁽^d⁾⁽¹⁾^{, a}^s^a^m^e^nde^{d by}^P^.^L^.¹^10-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹²⁷^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽²⁾⁽^G⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹²⁸^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽²⁾⁽^H⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹²⁹^P^.^L^.¹⁰²^-⁵⁵⁰^§¹³⁶⁷⁽^b⁾⁽²^{)(I), as}^a^m^en^d^e^d^b^y^P^.^L^.¹¹⁰^-²⁸⁹^§¹¹⁴⁵⁽^a).
¹³⁰^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽¹⁰⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹³¹^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽¹¹⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹³²^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽¹⁵⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹³³^P^.^L^.¹⁰^2-⁵⁵⁰^§^§¹³⁶⁷⁽^d⁾⁽¹⁾^,⁽^b⁾⁽⁵⁾⁽^D⁾^,^a^s^a^m^e^nde^{d by}^P^.^L^.¹^10-²⁸⁹^{§ 1}¹⁴⁵⁽^a⁾^.^T^h^e^a^c^t^inc^l^ude^s^s^p^e^cⁱ^fⁱ^c^pr^ov^is^ions
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¹³⁴^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽¹⁶⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
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^al^so^au^t^h^o^rⁱ^{zes t}^h^{e Di}^rect^o^r^o^f^t^h^e^F^H^F^A^,ⁱⁿ^cert^aⁱⁿ^ci^rcu^m^st^an^ces,^t^o^lⁱ^mⁱ^t^o^r^p^r^ohⁱ^bⁱ^t^“go^l^d^eⁿ^p^a^rach^u^t^e^p^a^ymen^t^s^,^”
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^c^ontro^lling^sha^r^e^h^ol^de^{rs, or a}^g^eⁿ^t^s^{. T}^h^is^pow^e^r^{is not}^lim^ite^{d e}^x^c^l^usiv^e^l^y^{to w}^h^eⁿ^the^FHFA^{is a}^c^ting^a^s^c^onse^r^v^a^{tor or}
^recei^ver.^“^G^o^l^d^eⁿ^p^a^rach^u^t^{e p}^a^y^m^en^t^,^{” as d}^e^fⁱⁿ^e^d^b^y^t^h^{e act}^,ⁱ^s^si^mⁱ^l^a^{r t}^o^w^h^atⁱ^s^co^mm^oⁿ^l^y^re^ferr^ed^t^o^{as a severan}^ce
^pa^c^k^a^g^e^.^P^.^L^.¹¹^0-²⁸⁹^§§¹⁰⁰²^a^nd¹¹^14.

contracts, the statute of limitation is six years beginning on the date the claim accrues, unless state
law provides a longer period. For tort claims, the statute of limitations is three years, unless state ¹³⁷
law provides a more lenient time frame.
Just like the FDIC, the FHFA, as conservator, may take any action “necessary to put the regulated
entity in a sound and solvent condition ... and [any action which is] appropriate to carry on the
business of the regulated entity and preserve and conserve the assets and property of the regulated ¹³⁸
entity.”
The FHFA has the authority as receiver to liquidate the enterprise and sell its assets. This includes
the ability to transfer the assets to a “limited-life regulated entity,” which is basically a GSE-¹³⁹¹⁴⁰
equivalent of a bridge-bank. The Agency also may “organize a successor enterprise.” The
FHFA may liquidate and sell assets without regard to local conditions (as is required for the FDIC
by the FDI Act). However, the FHFA is not given the other express powers granted to the FDIC as ¹⁴¹
receiver of a failed thrift or bank.
As previously mentioned, the FHFA is not bound by the least-cost to the insurance deposit fund
requirement because the GSEs do not hold FDIC-insured deposits. As a result, the FHFA has
greater flexibility in resolving insolvencies. That being said, the approaches taken by the FHFA in
handling an insolvent enterprise likely would be similar to those that have been applied by the
FDIC to resolve failed thrifts and banks.
For similar reasons, the cross-guarantee by commonly controlled insured depository institutions
provisions that are required by the FDI Act are not applicable to Fannie and Freddie.

¹³⁷^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽¹²⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹³⁸^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽²⁾⁽^D⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
¹³⁹^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽²⁾⁽^E⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
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¹⁴¹^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽²⁾⁽^E⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.

The claims process is virtually the same for the FHFA as the process for the FDIC acting as a
receiver of a failed bank or thrift, except that claimants are not given the right to administrative ¹⁴²
review, and P.L. 110-289 does not include priority for deposits.
As receiver of a failed enterprise, the FHFA is responsible for settling claims against the
enterprise. The funds for settling creditors’ claims are the proceeds from the sale and liquidation
of the institution’s assets. Creditors are notified that they must present their claims within a ¹⁴³
certain time frame, which may not be less than 90 days from the date of the notice. Within 180
days of receiving a claim, the FHFA must notify the claimant of whether or not it will allow the ¹⁴⁴
claim. The FHFA has authority to disallow claims “not proved to the satisfaction of the ¹⁴⁵
receiver.” When a claim has been disallowed, the claimant has 60 days to seek judicial review ¹⁴⁶
or the claim is deemed disallowed.
The amount of liability to claimants is limited to what the claimant would receive in liquidation, ¹⁴⁷
just like the maximum liability owed by the FDIC as receiver pursuant to the FDI Act.
The FHFA priority scheme is basically the same as that for the FDIC with the major exception
that deposit liabilities are not given priority. Generally, secured claims are paid before unsecured
claims and are to be paid to the extent of the security. Any liability beyond what is secured is ¹⁴⁸
handled with all other unsecured claims. The legislation specifies the following priority for
payment of unsecured claims that are proved to the satisfaction of the receiver:
• Administrative expenses of the receivership.
• Any other general or senior liability.

¹⁴²^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽⁵⁾⁽^D⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.
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^s^ubje^c^t^to^th^is^r^e^quir^e^m^e^{nt to}^pr^o^vⁱ^de^the^FH^FA^w^{ith notic}^e^aⁿ^d^pr^oof^of^theⁱ^r^c^l^aⁱ^m^,^gⁱ^vⁱ^ng^the^FH^FA^the^opp^or^tu^nity
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¹⁴⁸^P^.^L^.¹⁰^2-⁵⁵⁰^§¹³⁶⁷⁽^b)⁽⁵⁾⁽^D⁾^,^a^s^a^m^e^nde^{d by}^P.L^.¹¹^0-²⁸⁹^§¹¹⁴⁵⁽^a⁾^.

• Any obligation subordinated to general creditors which is not an obligation owed
to shareholders as shareholders.
• Obligations owed to shareholders arising as a result of their status as ¹⁴⁹
shareholders.
Shareholder claims are the lowest priority. While common and preferred stock may not be wholly
eliminated by a conservatorship or receivership, they are likely to be substantially reduced in
value.
In similar fashion to the FDIC, the FHFA may defeat claims against its interests unless the claim
is in writing and was “executed by an authorized officer or representative of the regulated ¹⁵⁰
entity.”
^Davⁱ^d^{H. C}^a^rp^en^ter ^{M. Mau}^r^een^M^u^rphy
^L^e^gⁱ^s^l^at^iv^{e A}^t^torn^e^y^L^e^gⁱ^s^l^at^iv^{e A}^t^torn^e^y
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