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House Passes Bank Failures Bill to Investigate FDIC

On Friday the House of Representatives put largely partisan weight behind a bill that would require the ""FDIC"":http://www.fdic.gov/ to investigate the 382 bank failures it has corralled with shutdowns since 2008. If reconciled with a similar bill passed by the Senate, H.R. 2056 could require the FDIC's inspector general to examine whether the current regulatory climate crimps lending for community banks.

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An FDIC spokesperson declined to comment for the story, speculating only that ""Rep. Lynn Westmoreland"":http://westmoreland.house.gov/ (R-Georgia) felt bank failures occurred too quickly.

In a ""statement"":http://financialservices.house.gov/News/DocumentSingle.aspx?DocumentID=254647 released by the ""House Financial Services Committee"":http://financialservices.house.gov/, chairman ""Rep. Spencer Bachus"":http://bachus.house.gov/index.php (R-Alabama) called the legislation ""part of our review"" of the impact left by government policies and regulations on economic activity.

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""No one wants regulators to allow unsafe practices, but no one wants regulators to stifle a potential economic recovery by applying regulatory standards in ways that needlessly inhibit bank lending,"" he said. ""I urge the Senate to take action on this bill and get it to the President's desk as soon as possible.""

The statement cites 140 bank failures over 2009 and 157 over 2010, claiming their concentration in only a handful of states.

In addition to assigning an investigatory role to the FDIC inspector general, the legislation would also peg the ""Government Accountability Office"":http://www.gao.gov/ with responsibilities that include studying the root causes underlying the bank failures and the potential for negative economic effects created by fair value accounting measures.

""The rash of bank failures has led some to question whether the FDIC's procedures for resolving troubled banks are appropriate in light of current economic conditions and whether these procedures have been consistently applied in the wake of the financial crisis,"" it added.

""There is no greater threat to our communities than bank failures,"" ""_Bloomberg News_"":http://www.bloomberg.com/news/2011-07-29/house-passes-bill-to-require-review-of-fdic-bank-failure-policy.html reports Westmoreland as saying. ""It is clear that Congress needs more information about the underlying causes.""

Following on the heels of the bill's passage, the FDIC negotiated acquisition agreements with three banks over three failures this weekend.

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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