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New Law Will Investigate FDIC’s Role in Bank Failures

The New Year began without any bank failures, but one new law will task the ""FDIC"":http://www.fdic.gov/ inspector general with checking the books to see if the agency helped exacerbate failures in 2011.

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The House voted Tuesday to pass a bill amended by the Senate and reconciled by both chambers in December that will compel investigations by the FDIC and ""Government Accountability Office"":http://www.gao.gov/. Reports suggested that ""President Barack Obama"":http://www.whitehouse.gov/administration/president-obama will likely sign off on the measure.

Once it becomes law, the bill will call for studies into whether the FDIC's loss-share agreements helped accelerate the number of bank failures in 2011.

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The bill's sponsors, Rep. ""Lynn Westmoreland"":http://westmoreland.house.gov/ (R-Georgia) and Sen. ""Saxby Chambliss"":http://chambliss.senate.gov/public/index.cfm (R-Georgia), hailed its passage in a joint statement.

""Community banks are the economic engine of our towns and cities, and the large number of failed banks in Georgia can have a devastating effect on our economic recovery,"" Westmoreland said.

""Without these local lenders, job growth and economic investment can dry up ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô an unmistakable reality proven by the fact that the ten states with the highest number of failures also have some of the highest unemployment and foreclosure rates in the country,"" he added.

""Hopefully, this legislation can lead to answers to not only what's behind these bank failures but also answers to how we can make sure this doesn't happen again in the future,"" he said.

""It is clear that Congress needs more information about the underlying causes of these bank failures. If there is a better way to resolve this crisis, we must pursue it,"" Chambliss said. ""This bill is the first step to doing that.""

Ninety-two banks went under in 2011, fewer than 156 that failed in 2010. FDIC spokespeople said in past interviews with _MReport_ that banks helped slow their failures by cleaning up their balance sheets last year.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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