Yesterday, the House of Representatives passed H.R. 2056, legislation sponsored by Congressman Lynn Westmoreland (GA-03) and Senator Saxby Chambliss (GA), and sent it to President Obama for his signature. The legislation will conduct studies looking into potential causes for the high number of bank failures across the United States. Even though financial markets have somewhat stabilized since the dramatic drops we saw in late 2008, 140 banks failed in 2009 and another 157 failed in 2010. Georgia leads the nation in bank failures, with more than 73 failed banks since 2008.
"When I ask federal regulators why so many banks in Georgia and across the country have failed and continue to fail, I'm given dozens of different excuses, but no real solutions to stopping this epidemic. 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. Without these local lenders, job growth and economic investment can dry up -- 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. 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," stated Westmoreland.
"Since 2008, there have been more than 400 bank failures nationwide. Seventy three of those have occurred in Georgia alone. 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. This bill is the first step to doing that," stated Chambliss.
The legislation would provide for two studies -- one conducted by the Inspector General of the FDIC and one by the General Accounting Office (GAO) -- to look into the impact some of the policies and procedures of the FDIC, including loss-share agreements and paper losses, and whether they may have negatively affected troubled institutions. The studies would look at banks in the ten states with the highest number of failures: Arizona, California, Florida, Georgia, Illinois, Michigan, Minnesota, Missouri, Nevada, and Washington. The legislation was initially introduced in May of this year by Congressman Westmoreland. It passed the House in July and was sent to the Senate for consideration. After being amended by the Senate in November, it was sent back to the House for final passage. The president is expected to sign the bill into law before the end of the year.
View Congressman Westmoreland Discussing H.R. 2056 on the House Floor
Read the Senate amendment to H.R. 2056