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112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-470

======================================================================

                                     

 
            SEQUESTER REPLACEMENT RECONCILIATION ACT OF 2012

                               ----------                              

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 5652

  A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201 OF THE 
        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2013

                             together with

                             MINORITY VIEWS




  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                         SEQUESTER REPLACEMENT
                       RECONCILIATION ACT OF 2012




For sale by the Superintendent of Documents, U.S. Government Printing Office, 
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112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-470

======================================================================

                                     


            SEQUESTER REPLACEMENT RECONCILIATION ACT OF 2012

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 5652

  A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201 OF THE 
        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2013

                             together with

                             MINORITY VIEWS




  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                        COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey            CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri               LLOYD DOGGETT, Texas
TOM COLE, Oklahoma                   EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California           JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah                 BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana          MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma             TIM RYAN, Ohio
DIANE BLACK, Tennessee               DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin            GWEN MOORE, Wisconsin
BILL FLORES, Texas                   KATHY CASTOR, Florida
MICK MULVANEY, South Carolina        HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas                KAREN BASS, California
TODD C. YOUNG, Indiana               SUZANNE BONAMICI, Oregon
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Introduction.....................................................     3
Committee Oversight Findings.....................................    10

Title I--Committee on Agriculture:
    Transmittal Letter...........................................    15
    Brief Explanation............................................    19
    Purpose and Need.............................................    19
    Section-by-Section...........................................    23
    Committee Consideration......................................    24
    Reporting the Bill--Roll Call Votes..........................    25
    Committee Oversight Findings.................................    25
    Performance Goals and Objectives.............................    25
    Constitutional Authority Statement...........................    25
    Budget Act Compliance (Congressional Budget Office Estimate).    25
    Changes in Existing Law......................................    31
    Minority Views...............................................    41

Title II--Committee on Energy and Commerce:
    Transmittal Letter...........................................    45
    Purpose and Summary..........................................    49
    Background and Need for Legislation..........................    49
    Hearings.....................................................    56
    Committee Consideration......................................    57
    Committee Votes..............................................    57
    Committee Oversight Findings.................................    78
    Statement of General Performance Goals and Objectives........    78
    New Budget Authority, Entitlement Authority, and Tax 
      Expenditures...............................................    78
    Earmarks.....................................................    78
    Committee Cost Estimate......................................    78
    Congressional Budget Office Estimate.........................    78
    Federal Mandates Statement...................................    88
    Advisory Committee Statement.................................    88
    Constitutional Authority Statement...........................    88
    Applicability to Legislative Branch..........................    88
    Section-by-Section Analysis of the Legislation...............    88
    Changes in Existing Law Made by the Bill, as Reported........    92
    Dissenting Views.............................................   108

Title III--Committee on Financial Services:
    Transmittal Letter...........................................   151
    Purpose and Summary..........................................   154
    Background and Need for Legislation..........................   155
    Hearings.....................................................   160
    Committee Consideration......................................   163
    Committee Votes..............................................   163
    Constitutional Authority Statement...........................   169
    Committee Oversight Findings.................................   169
    Performance Goals and Objectives.............................   170
    New Budget Authority, Entitlement Authority, and Tax 
      Expenditures...............................................   171
    Committee Cost Estimate......................................   171
    Congressional Budget Office Estimate.........................   171
    Federal Mandates Statement...................................   182
    Advisory Committee Statement.................................   182
    Applicability to Legislative Branch..........................   183
    Earmark Identification.......................................   183
    Section-by-Section Analysis of the Legislation...............   184
    Changes in Existing Law......................................   191
    Dissenting Views.............................................   358

Title IV--Committee on the Judiciary:
    Transmittal Letter...........................................   363
    Summary of the Major Policy Decisions in the Legislation.....   365
    Background and Need for the Legislation......................   365
    Report Language: Section-by-Section..........................   412
    Advisory on Earmarks.........................................   413
    Committee Oversight Findings.................................   413
    Constitutional Authority Statement...........................   413
    Committee Votes..............................................   413
    Changes in Existing Law......................................   414
    Performance Goals............................................   414
    Congressional Budget Office Estimate.........................   415
    Dissenting Views.............................................   421

Title V--Committee on Oversight and Government Reform:
    Summary of the Major Policy Decisions in the Legislation.....   455
    Section-By-Section...........................................   456
    Committee Oversight Findings.................................   456
    Committee Votes..............................................   457
    Performance Goals............................................   457
    Congressional Budget Office Estimate.........................   457
    Changes in Existing Law......................................   462
    Dissenting Views.............................................   469

Title VI--Committee on Ways and Means:
    Transmittal Letter...........................................   473
    Subtitle A:
        Summary and Background...................................   475
        Legislative History......................................   476
        Explanation of Provision.................................   476
        Votes of the Committee...................................   479
        Budget Effects of the Provisions.........................   480
        Other Matters To Be Discussed Under the Rules of the 
          House..................................................   486
        Changes in Existing Law Made by the Budget Reconciliation 
          Legislative Recommendation as Transmitted..............   487
        Dissenting Views.........................................   489
    Subtitle B:
        Summary and Background...................................   493
        Explanation of Provision.................................   494
        Votes of the Committee...................................   495
        Budget Effects of the Provisions.........................   496
        Other Matters To Be Discussed Under The Rules of the 
          House..................................................   499
        Changes in Existing Law Made by the Legislative 
          Recommendations, as Transmitted........................   501
        Dissenting Views.........................................   503
    Subtitle C:
        Summary of the Major Policy Decisions in the Legislation.   505
        Report Language: Section-by-Section......................   513
        Committee Oversight Findings.............................   513
        Constitutional Authority Statement.......................   513
        Committee Votes..........................................   514
        Congressional Budget Office cost estimate................   514
        Changes in Existing Law (Ramseyer Submission)............   517
        Dissenting Views.........................................   539

Votes of the Committee...........................................   541
Statement on Committee Oversight Findings........................   546
Performance Goals and Objectives.................................   547
Constitutional Authority Statement...............................   547
Advisory Committee Statement.....................................   547
Applicability to the Legislative Branch..........................   547
Federal Mandates Statement.......................................   547
Advisory on Earmarks.............................................   547
Changes in Existing Law Made by the Bill as Reported.............   547
Committee Cost Estimate..........................................   547
Appendix: Revenues...............................................   553
Minority Views...................................................   559
H.R. 5652, Sequester Replacement Reconciliation Act of 2012......   573


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-470

======================================================================




                         SEQUESTER REPLACEMENT
                       RECONCILIATION ACT OF 2012

                                _______
                                

PROVIDING FOR RECONCILIATION PURSUANT TO SECTION 201 OF THE CONCURRENT 
             RESOLUTION ON THE BUDGET FOR FISCAL YEAR 2013

                                _______
                                

  May 9, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Ryan, from the Committee on Budget, submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 5652]

    The Committee on the Budget, to whom reconciliation 
recommendations were submitted pursuant to subsection (a) of 
section 201 of House Concurrent Resolution 112, the concurrent 
resolution on the budget for fiscal year 2013, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.
                              Introduction

                              ----------                              


    The Path to Prosperity budget that passed the U.S. House of 
Representatives on March 29, 2012 set in motion a process to 
reprioritize certain across-the-board spending reductions 
enacted as part of the Budget Control Act of 2011 [BCA]. This 
process, called reconciliation, consists of a special procedure 
to give expedited consideration to bills enacting the spending, 
revenue, and debt policies contained in the budget resolution.
    To trigger these expedited procedures, The Path to 
Prosperity included reconciliation instructions calling on six 
House committees to achieve specified amounts of deficit 
reduction from programs within their jurisdictions. This 
Reconciliation Act consists of the legislation they have 
recommended to achieve the same deficit reduction required by 
the BCA, but without the haphazard cuts--especially to national 
security--that an across-the-board approach would entail.

                     The Budget Control Act of 2011

    In mid-2011, as the nation approached the statutory limit 
on how much it could legally borrow, the Obama administration 
asked Congress for a ``clean piece of legislation'' to increase 
the government's legal borrowing authority without any spending 
cuts to match.\1\
---------------------------------------------------------------------------
    \1\Brian Patrick, ``Debt Limit Tick Tock,'' Blog Update, Office of 
Majority Leader Eric Cantor, August 1, 2011. http://majorityleader.gov/
blog/2011/08/debt-limit-tick-tock.html
---------------------------------------------------------------------------
    House Republicans refused to give the President the blank 
check he requested. Instead, Speaker of the House John Boehner 
insisted that any increase in the debt ceiling be accompanied 
by a greater amount of spending reduction. Speaker Boehner made 
clear on May 9, 2011 that, ``Without significant spending cuts 
and reforms to reduce our debt, there will be no debt limit 
increase. And the cuts should be greater than the accompanying 
increase in debt authority the President is given.''\2\
---------------------------------------------------------------------------
    \2\Remarks by House Speaker John Boehner. Economic Club of New 
York. May 9, 2011. http://www.speaker.gov/News/
DocumentSingle.aspx?DocumentID=240370
---------------------------------------------------------------------------
    Once it became clear that Congress would not rubber-stamp 
his requested increase in the debt ceiling, President Obama 
announced that he would not accept a debt-ceiling deal that did 
not include large tax increases on American families and 
businesses.\3\
---------------------------------------------------------------------------
    \3\Patrick, ``Debt Limit Tick Tock.''
---------------------------------------------------------------------------
    House Republicans succeeded in protecting hardworking 
taxpayers by preventing the President from securing a bill 
containing tax hikes. Instead, a bipartisan agreement was 
forged to reduce the deficit by putting an upper limit on 
discretionary spending and to set in motion a framework to 
achieve additional savings. The BCA paired a $2.1 trillion 
increase in the public debt limit with equivalent deficit 
reduction over the ensuing 10 years.
    The BCA called for deficit reduction in three phases:
    1. First, it established caps on discretionary spending, 
achieving approximately $917 billion in savings over 10 years.
    2. Second, it established and called upon a Joint Select 
Committee on Deficit Reduction (JSCDR) to produce legislation 
with at least an additional $1.2 trillion in deficit reduction.
    3. Third, it established an automatic sequestration process 
to force spending reductions in the event the JSCDR did not 
produce a deficit-reduction bill or Congress refused to pass 
it. This ``sequester'' would result in immediate discretionary 
spending reductions effective January 2, 2013.
    Understanding each component of the BCA is critical to 
understanding the fiscal impact of the law as a whole. The 
BCA's pre-sequester spending caps reduced discretionary 
spending for fiscal year 2013 to a maximum of $1.047 trillion. 
Some, including Senate Majority Leader Harry Reid, are still 
insisting that House Republicans are obligated to pass fiscal 
year 2013 spending bills at these levels.\4\
---------------------------------------------------------------------------
    \4\Naftali Bendavid, ``Fight Breaks Out Over 2013 Budget Cuts,'' 
Wall Street Journal, March 14, 2012. http://blogs.wsj.com/washwire/
2012/03/14/fight-breaks-out-over-2013-budget-cuts/
---------------------------------------------------------------------------
    But Congress is no longer operating in a pre-sequester 
world. Last November, the JSCDR announced that it could not 
reach agreement on a deficit-reduction bill by the statutory 
deadline, thus triggering the sequester. Congress is now 
operating in a post-sequester world--one in which discretionary 
spending for fiscal year 2013 is capped at $949 billion. Every 
non-exempt defense account will be cut proportionally for a 
total of $55 billion, or 10 percent, and every non-exempt non-
defense account will be cut proportionally for a total of $43 
billion, or 8 percent, in January 2013 unless Congress acts to 
replace this sequester by reprioritizing the savings.
    These across-the-board and arbitrary cuts would be 
devastating to America's defense capabilities. Leaders of both 
parties agree that sequester savings should be reprioritized. 
On August 4, 2011, then-director of the Office of Management 
and Budget (now White House Chief of Staff) Jack Lew wrote that 
the sequester was not intended to be implemented: ``Make no 
mistake: the sequester is not meant to be policy. Rather, it is 
meant to be an unpalatable option that all parties want to 
avoid.''\5\
---------------------------------------------------------------------------
    \5\Jack Lew, ``Security Spending in the Deficit Agreement,'' August 
4, 2011. http://www.whitehouse.gov/blog/2011/08/04/security-spending-
deficit-agreement (accessed March 19, 2012).
---------------------------------------------------------------------------

            The Joint Select Committee on Deficit Reduction

    While both parties have expressed their desire to avoid the 
consequences of the sequester, there is profound disagreement 
over how. This disagreement was evident in the JSCDR's failure 
to produce a deficit-reduction bill last year.
    Despite the good-faith effort on the part of committee 
Republicans to avoid the sequester (and, by extension, to avoid 
its disproportionate impact on defense), the negotiations 
exposed a fundamental lack of seriousness by some in Washington 
regarding the need to control government spending and address 
the structural drivers of the debt. As JSCDR Co-Chairman Jeb 
Hensarling made clear, Democrats on the committee ``were 
unwilling to agree to anything less than $1 trillion in tax 
hikes--and unwilling to offer any structural reforms to put our 
health care entitlements on a permanently sustainable 
basis.''\6\
---------------------------------------------------------------------------
    \6\Hensarling, Jeb. ``Why the Super Committee Failed,'' Wall Street 
Journal, November 22, 2011. http://online.wsj.com/article/
SB10001424052970204531404577052240098105190.html
---------------------------------------------------------------------------
    Committee Democrats refused to address the problem, so the 
problem remains. Therefore, the immediate question of how to 
reprioritize sequester savings--and the larger challenge of 
averting a debt-fueled economic crisis--have become central to 
this year's budget debate during this year's budget season.

                The President's Fiscal Year 2013 Budget

    The President's fiscal year 2013 budget calls on Congress 
to replace the sequester, but it does not make a specific 
proposal to turn the sequester off. It assumes that the 
sequester does not occur, but it does not lay out a specific 
path forward to avoid its consequences. The President's budget 
includes tax increases and spending cuts (including a $487 
billion reduction in defense spending), which it claims are 
enough to offset the sequester--but it includes a net spending 
increase that consumes nearly all of its claimed deficit 
reduction.
    This approach is deeply flawed, for three reasons. First, 
it imposes a net tax increase on American families and 
businesses of $2.0 trillion. Washington's fiscal imbalance is 
overwhelmingly driven by runaway spending, not insufficient tax 
revenue, and reducing the deficit by taking more from 
hardworking Americans would simply slow the economy, reduce job 
opportunities, and ultimately prove counterproductive as a 
deficit-reduction strategy.
    Second, despite the large tax increase, the President's 
budget also contains a net spending increase of $1.4 trillion, 
for a total of only $605 billion in deficit reduction. The rest 
of the President's deficit-reduction claims are based on 
discredited budget gimmicks, including almost $1 trillion in 
``savings'' that come from projecting current wartime spending 
in Iraq and Afghanistan out for the next 10 years, then 
proposing not to spend that money, even though it was never 
requested and was never going to be spent.
    And third, much of the President's actual spending 
reduction comes from cutting too deeply into the Defense 
Department. Although the President's budget does not cut 
defense as deeply as the sequester would, these cuts would 
still jeopardize the capability of the U.S. military.

                     The Senate's Lack of a Budget

    It has been three years since the Senate passed a budget, 
and the legal deadline for passing a congressional budget 
resolution this year has already passed. Yet there has been no 
indication that Senator Reid plans to put forward an 
alternative plan for prioritizing spending, much less for 
averting the sequester. Instead, he continues to insist that 
Congress is still operating in a pre-sequester world, even 
though the President's own budget admits that ``the sequester 
was triggered and will take effect in January 2013 if no action 
is taken.''\7\ Senator Reid's approach has been the very 
definition of inaction. There is a better way forward.
---------------------------------------------------------------------------
    \7\``Fiscal Year 2013 Budget of the U.S. Government,'' Office of 
Management and Budget, February 2012. http://www.whitehouse.gov/sites/
default/files/omb/budget/fy2013/assets/budget.pdf
---------------------------------------------------------------------------

                    The Path to Prosperity Approach:
              Reprioritize Savings Through Reconciliation

    Pursuant to the Path to Prosperity budget resolution, the 
House has advanced a series of reforms that replace across-the-
board cuts scheduled in law with common-sense reforms that take 
steps to address government's unsustainable autopilot spending.
    Six House Committees have advanced legislation that will:
    1. Stop Abuse, by Ensuring that Individuals are Actually 
Eligible for the Taxpayer Benefits They Receive;
    2. Eliminate Government Slush Funds and Stop Bailouts;
    3. Control Runaway, Unchecked Spending;
    4. Restrain Spending on Government Bureaucracies; and
    5. Reduce Waste and Duplicative Programs.
    The savings from these reforms will replace the arbitrary 
discretionary sequester cuts and lay the groundwork for further 
efforts to avert the spending-driven economic crisis before us.
    Below is an outline of the reforms being advanced by the 
six committees (Agriculture, Energy and Commerce, Financial 
Services, Judiciary, Oversight and Government Reform, and Ways 
and Means) that received reconciliation instructions under the 
budget resolution.

 1. STOP ABUSE BY ENSURING THAT INDIVIDUALS ARE ACTUALLY ELIGIBLE FOR 
                   THE TAXPAYER BENEFITS THEY RECEIVE

    A troubling trend has emerged in recent years, in which 
eligibility restrictions intended to focus limited government 
resources on those who need them most have been systematically 
weakened or have broken down due to loopholes in the law. This 
Reconciliation Act protects aid for those who need it by making 
sure that taxpayer dollars are not going to those who don't 
qualify for assistance.
     It eliminates a loophole that has allowed 
individuals to qualify for food stamps on such flimsy pretexts 
as receiving a brochure from another government program.
     It eliminates a loophole that allows individuals 
to increase their food-stamp benefits by as much as $130 a 
month for receiving as little as $1 in federal utility 
assistance.
     It stops the practice of sending the refundable 
portion of the Child Tax Credit to individuals who are 
ineligible to work in the United States.
     It requires anyone who receives an overpayment of 
health insurance subsidies under the Democrats' health care law 
to repay the full amount of the overpayment.

         2. ELIMINATE GOVERNMENT SLUSH FUNDS AND STOP BAILOUTS

    Recent legislation has all too often ceded too much power 
to unaccountable bureaucrats, and has just as often provided 
them with access to taxpayer money in ways that fuel wasteful 
spending and bailouts. This Reconciliation Act targets these 
indefensible slush funds and automatic subsidies for 
elimination.
     It protects taxpayers by eliminating the Wall 
Street bailout fund included as part of the 2010 Dodd-Frank 
financial overhaul.
     It terminates the Obama Administration's 
ineffective housing bailouts, which have become the target of 
widespread and bipartisan criticism for actually making matters 
worse for homeowners.
     It reforms the National Flood Insurance Program to 
increase financial accountability by requiring the program to 
sufficiently cover risks.
     It eliminates the unaccountable government health 
slush fund created by the Democrats' health care law.

                 3. CONTROL RUNAWAY, UNCHECKED SPENDING

    Federal programs across the board experienced an explosion 
of funding in recent years. Federal spending on food stamps has 
increased by 267 percent over the last decade--with part of 
that expansion coming from President Obama's failed 2009 
stimulus law. Medicaid spending is up 86 percent over the last 
ten years. And the Democrats' health care law would increase 
spending by $1.6 trillion over the next ten years. This 
Reconciliation Act takes measures to stop the spending spree 
and restrain spending growth in the future.
     It repeals automatic increases in food-stamp 
benefits enacted as part of the President's failed stimulus 
law.
     It repeals a provision of the Democrats' health 
care law that allows the Secretary of Health and Human Services 
unprecedented authority to spend ``such sums as necessary'' for 
grants to states to comply with the law.
     It defunds the health law's ``CO-OP'' program, 
which disburses government subsidized loans--50 percent of 
which, according to the Office of Management and Budget, will 
never be repaid.
     It gives states more freedom and flexibility to 
tailor Medicaid to the needs of their unique populations.
     It prevents provisions of the health law from 
exacerbating problems with Medicaid's current matching formula, 
which gives states and territories a perverse incentive to grow 
the program and little incentive to save.

            4. RESTRAIN SPENDING ON GOVERNMENT BUREAUCRACIES

    The federal government has added 149,000 new workers since 
the President took office. Such a rapid expansion of government 
weighs on private-sector employment, because it requires either 
higher taxes now or higher borrowing now and higher taxes 
later. This Reconciliation Act aims to slow the federal 
government's unsustainable growth, reduce the public-sector 
bureaucracy, and reflect the growing frustration of workers 
across the country at the privileged rules enjoyed by 
government employees.
     It eliminates the ability of the newly created 
Consumer Financial Protection Bureau and Office of Financial 
Research to set their own budgets.
     It requires Federal employees to more equitably 
share in the cost of their retirement benefits.
     It eliminates the provision that pays Federal 
workers a special benefit if they retire early.

                5. REDUCE WASTE AND DUPLICATIVE PROGRAMS

    Annual examinations of wasteful spending conducted by the 
Federal government's independent auditors routinely reach the 
same conclusion: Government agencies and departments are rife 
with examples of waste, duplication and overlap.\8\ This 
Reconciliation Act protects taxpayers and reduces spending by 
eliminating wasteful and duplicative programs.
---------------------------------------------------------------------------
    \8\2012 Annual Report: Overlap and Fragmentation, Achieve Savings, 
and Enhance Revenue, Government Accountability Office, March 2012. 
http://www.gao.gov/products/GAO-12-342SP
---------------------------------------------------------------------------
     It repeals the outdated and duplicative Social 
Services Block Grant, whose missions have been supplanted by 
dozens of newer Federal programs.
     It begins the process of consolidating the dozens 
of overlapping and duplicative Federal employment training 
programs by eliminating 50/50 cost-sharing for an employment 
training program tied to food stamps.
     It reforms the medical liability system by reining 
in unlimited lawsuits and thereby making health care delivery 
more accessible and affordable for families.
     It removes incentives that encourage states to add 
to their Medicaid rolls through careless processes that lead to 
billions in overpayments.

                 The Sequester Replacement Act of 2012

    By targeting fraud, eliminating slush funds, restraining 
runaway spending, reforming bureaucracies, and ending wasteful 
and duplicative programs, this Reconciliation Act provides a 
responsible way to achieve all of the 2013 spending reductions 
required by the BCA. With--and only with--the enactment of this 
targeted, carefully prioritized spending reduction, Congress 
can move to the second part of this task: replacing the across-
the-board sequester before it jeopardizes the security of 
American families and the safety of our troops.
    A separate piece of legislation, the Sequester Replacement 
Act of 2012 [SRA], would achieve this task by amending the BCA 
to replace the sequester for fiscal year 2013 with the spending 
reductions enacted through the Reconciliation Act. To safeguard 
against an end-run around the Reconciliation Act, the SRA 
stipulates that it would only take effect upon enactment of the 
reconciliation bill.
    The SRA takes additional steps to protect the U.S. military 
and veterans and to lock in spending savings for the American 
taxpayer:
     It clarifies that veterans programs are not 
subject to sequester.
     It lowers the BCA's discretionary caps to levels 
set in the House-passed Path to Prosperity budget.
     It closes a potential loophole that would 
otherwise allow Congress to enact large direct spending 
increases by counting Reconciliation Act savings as an offset.
     It eliminates the fiscal year 2013 sequester of 
mandatory spending on national defense.
    In late 2011, the President issued a veto threat against 
any legislation overturning the sequester unless fully offset. 
The President called on Congress to develop an alternative: 
``The only way these spending cuts will not take place is if 
Congress gets back to work and agrees on a balanced plan to 
reduce the deficit by at least $1.2 trillion. That's exactly 
what they need to do. That's the job they promised to do. And 
they've still got a year to figure it out.''\9\
---------------------------------------------------------------------------
    \9\Statement by the President on the Supercommittee, November 21, 
2011, the White House. http://www.whitehouse.gov/the-press-office/2011/
11/21/statement-president-supercommittee
---------------------------------------------------------------------------
    With passage of the Reconciliation Act and the SRA, the 
House will have done its job. These bills take the responsible 
step of offsetting the cost (approximately $78 billion) of 
replacing the automatic across-the-board discretionary spending 
cuts that are scheduled to occur on January 2, 2013 through 
sequestration. The additional savings achieved through 
reconciliation beyond the $78 billion (over $237 billion in the 
next ten years) would further reduce the deficit. And this 
approach provides a blueprint for replacing the rest of the 
sequester with responsible, targeted spending reduction in the 
years ahead.

             The Need for Willing Partners to Move Forward

    This Reconciliation Act provides a clear solution that can 
be implemented quickly to replace the sequester. It does so by 
using an expedited procedure to reduce lower-priority spending. 
This solution cuts through the gridlock in Washington to start 
eliminating excessive autopilot spending immediately. It 
protects taxpayers, and it would shield the U.S. military from 
a crippling, 10 percent across-the-board reduction in its 
funding.
    Unfortunately, the House needs willing partners to 
implement this solution--and the Senate Democratic leadership's 
only plan has been to oppose solutions put forward in the 
House. U.S. troops and their families should not have to suffer 
because the Democratic Party's leaders refuse to lead. House 
Republicans will continue to show a way forward by directly 
addressing the nation's most urgent fiscal and economic 
challenges. It is not too late for Americans to choose a better 
path.
    Under the Congressional Budget Act, the Budget Committee 
cannot amend this reconciliation bill. However, there are two 
changes the Committee intends to seek at the Rules Committee. 
First, the Committee supports the incorporation of the 
Sequester Replacement Act (HR 4966) in this Reconciliation 
bill. Second, the Committee supports a technical amendment to 
the Committee on Oversight and Government Reform's submission 
to ensure that the taxpayer receives the full savings from the 
proposed federal retirement reforms.

                    Oversight Hearings and Findings

    Pursuant to clause 3(c)(1) of Rule XIII of the Rules of the 
House of Representatives, the oversight findings of the 
Committee on the Budget and recommendations are set forth in 
this section. In addition, the oversight findings of each 
committee of jurisdiction are included at the appropriate 
places in this committee report.
    The Committee on the Budget held nine hearings in 2012 that 
have informed the Committee's work on the FY 2013 budget 
resolution including reconciliation legislation reported 
pursuant to that budget resolution. (A complete list of these 
hearings is included below.) The Budget Committee staff has 
also engaged in intensive discussions with executive branch, 
congressional, and private sector experts to consider the 
implications of the deficit and debt crisis facing the country 
and the best means of reducing current and future deficits. 
These hearings and consultations informed the committee's 
reconciliation instructions to each of the six authorizing 
committees. In particular, the recent rapid growth of means-
tested entitlements through benefit and eligibility expansions 
poses a budget problem that this reconciliation bill begins to 
address.
    The Committee on the Budget has also inquired into the 
operation and implications of the sequester required by the 
Budget Control Act. The Office of Management and Budget is the 
lead agency responsible for implementing any sequester and 
witnesses from this agency have twice testified before the 
Budget Committee this year. Unfortunately, in both the February 
15 and April 25 hearings, the administration declined to 
provide specific information in response to Members' questions 
relating to what the administration's specific proposal is to 
avoid the sequester and how the administration would implement 
the sequester if legislation is not enacted by January 2, 2013. 
In a third attempt to fill the remaining information gaps, the 
Chairman of the Committee on the Budget wrote to Acting OMB 
Director Zients on April 26, requesting additional information 
by May 4 on how the administration would execute the sequester 
required by the Budget Control Act. To date Acting Director 
Zients has not responded.
    The Committee intends to continue to conduct active 
oversight of the execution and implementation of the Budget 
Control Act over the course of 2012 as it works to avoid the 
negative consequences of a sequester, while ensuring that 
significant deficit reduction is not delayed.

         2012 OVERSIGHT HEARINGS OF THE COMMITTEE ON THE BUDGET
------------------------------------------------------------------------
    Date               Topic                       Witnesses
------------------------------------------------------------------------
Feb. 1        Budget and Economic      Doug Elmendorf, CBO Director
               Outlook
------------------------------------------------------------------------
Feb. 2        The State of the U.S.    Ben Bernanke, Federal Reserve
               Economy                  Board Chairman
------------------------------------------------------------------------
Feb. 15       The President's FY 2013  Jeffrey Zients, OMB Acting
               Budget Request           Director
------------------------------------------------------------------------
Feb. 16       The President's FY 2013  Timothy Geithner, Secretary of
               Revenue and Economic     the Treasury
               Policy Proposals
------------------------------------------------------------------------
Feb. 28       Strengthening Health     Stephen Goss, Actuary, Social
               and Retirement           Security Administration
               Security                Rick Foster, Actuary, Center for
                                        Medicare & Medicaid Services
------------------------------------------------------------------------
Feb. 29       The Department of        Leon Panetta, Secretary of
               Defense and the FY       Defense
               2013 Budget             General Martin Dempsey, Chairman
                                        of the Joint Chiefs of Staff
------------------------------------------------------------------------
Mar. 8        Members' Day             Members of Congress
------------------------------------------------------------------------
April 17      Strengthening the        Private Sector Experts on Federal
               Safety Net               Safety Net Programs
------------------------------------------------------------------------
April 25      Replacing the Sequester  Danny Werfel, OMB Controller
                                       Susan Poling, GAO Deputy General
                                        Counsel
------------------------------------------------------------------------

                 TITLE I--THE COMMITTEE ON AGRICULTURE
                         LETTER OF TRANSMITTAL

                              ----------                              

                                  Committee on Agriculture,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, Committee on the Budget,
Washington, DC.
    Dear Mr. Chairman: I am transmitting herewith the 
recommendations of the Committee on Agriculture with respect to 
the reconciliation bill for fiscal year 2013, provided under 
House Concurrent Resolution 112, the Concurrent Resolution on 
the Budget for Fiscal Year 2013 and as modified by H. Res. 614.
    The enclosed recommendations were adopted by this Committee 
in a business meeting on April 18, 2012, in the presence of a 
quorum. Enclosed please find a hard copy of the Committee's 
recommendations on Title I--Agriculture; Section-by-Section; 
Purpose and Need; Committee Consideration; CBO score; and the 
remainder of the contents as required, including a set of 
Minority Views.
    With best wishes, I am
            Sincerely,
                                            Frank D. Lucas,
                                                          Chairman.
    Enclosure.
                 TITLE I--THE COMMITTEE ON AGRICULTURE

                           TABLE OF CONTENTS

                               __________
                                                                   Page
Brief Explanation................................................    19
Purpose and Need.................................................    19
Section-by-Section...............................................    23
Committee Consideration..........................................    24
Reporting the Bill--Roll Call Votes..............................    25
Committee Oversight Findings.....................................    25
Performance Goals and Objectives.................................    25
Constitutional Authority Statement...............................    25
Budget Act Compliance (Congressional Budget Office Estimate).....    25
Changes in Existing Law..........................................    31
Minority Views...................................................    41
                     TITLE I--AGRICULTURAL PROGRAMS

                           Brief Explanation

    The Agricultural Reconciliation Act of 2012 reduces 
spending within the jurisdiction of the Committee on 
Agriculture as required by H. Con. Res. 112, establishing the 
budget for the United States Government for fiscal year 2013 
and setting forth appropriate budgetary levels for fiscal years 
2014 through 2022, as passed by the House of Representatives on 
March 29, 2012, as modified by H. Res. 614.

                            Purpose and Need

    The House Budget Resolution, H. Con. Res. 112, as modified 
by H. Res. 614, included reconciliation instructions directing 
the Committee on Agriculture to report changes in laws within 
its jurisdiction that result in savings over fiscal years 2012 
through 2013, fiscal years 2012 through 2017, and fiscal year 
2012 through 2022, with estimates of $7.7 billion, $19.7 
billion, and $33.2 billion respectively.
    The nation faces a severe debt crisis with approximately 
$16 trillion in federal debt and counting. The House is doing 
its part to take a serious, common sense look at all programs 
and spending trends across the entire federal budget in order 
to address our nation's mounting debt. It is unrealistic to 
think that we can meet these pressing challenges without 
reducing federal spending. As in previous reconciliation bills, 
the Committee on Agriculture has shown willingness to do its 
part to ensure our nation's fiscal well being.
    The Supplemental Nutrition Assistance Program (SNAP), 
formerly known as the food stamp program, has seen an 
unprecedented growth in participation and cost over the past 
ten years, now accounting for almost 80 percent of the 
Committee's mandatory spending. Since 2002, the cost of SNAP 
has nearly tripled, increasing by 270 percent while 
participation has more than doubled. Consequently, the 
Committee agreed to achieve our directed savings by reducing 
SNAP spending by $35.8 billion over ten years, which represents 
only a four percent cut to the program. When programs within 
the Committee's jurisdiction soar well beyond historical 
participation and spending patterns, it is the Committee's duty 
to know why these programs are seeing such a surge and take 
action if necessary.
    These changes to SNAP are reasonable and credible 
approaches that will increase the integrity of the program. The 
provisions passed by the House Committee on Agriculture will 
close program loopholes, significantly reduce waste and abuse 
within the program, eliminate costs that taxpayers can no 
longer afford, and ensure the program continues to serve those 
who are most in need of food assistance according to the rule 
of law. It is the Committee's clear intent that none of the 
provisions passed by the Committee prevent families who qualify 
for assistance under SNAP law from receiving their benefits.
    The first provision closes a loophole in SNAP regarding how 
Low Income Home Energy Assistance Program (LIHEAP) payments 
interact with SNAP benefit calculation. Current law allows low-
income households receiving any amount of LIHEAP assistance, 
even $1, to automatically qualify for the SNAP Standard Utility 
Allowance (SUA). In the last several years, approximately 16 
states and the District of Columbia have been taking advantage 
of this loophole to bring more SNAP benefits to their states.
    In practice, if a participant receives $1 in LIHEAP, they 
can automatically deduct the SUA from their income. Therefore, 
their net income is reduced, and they subsequently receive a 
higher amount in SNAP benefits. According to a newsletter 
provided by the U.S. Department of Health and Human Services, 
Administration for Children and Families, an annual $1 LIHEAP 
benefit in New York will provide an average monthly hike in 
SNAP benefits of $131 for nearly 90,000 households in New York 
City. Similarly, an Associated Press article reported that the 
state of Washington sent out $1 LIHEAP checks to trigger an 
additional $43 million in SNAP benefits. The agreed to 
provision will end this egregious practice that uses the 
interaction between LIHEAP and SNAP to abuse the program. Under 
this provision, LIHEAP payments will no longer automatically 
trigger the SUA deduction, thus saving the taxpayers $14.3 
billion over ten years.
    States also have the option of using ``categorical 
eligibility,'' or automatic eligibility, which allows those 
receiving benefits from other specified low-income assistance 
programs to be eligible for SNAP. These other programs are 
Temporary Assistance for Needy Families (TANF), Supplemental 
Security Income (SSI), or other state general assistance 
programs. TANF assistance can be in the form of cash or non-
cash benefits (i.e. informational brochures, or access to an 
informational 800-number). When states implement categorical 
eligibility, these households do not need to meet SNAP asset or 
gross income tests. As of May 1, 2012, 43 jurisdictions (40 
States, the District of Columbia, Guam, and the U.S. Virgin 
Islands) have implemented ``broad-based'' categorical 
eligibility. These jurisdictions generally make all households 
with incomes below a state-determined income threshold eligible 
for SNAP.
    This Administration has been actively encouraging states to 
implement this policy as demonstrated through various U.S. 
Department of Agriculture (USDA) memos. One memo dated March 
18, 2010, states, ``With broad-based categorical eligibility, 
state agencies can effectively raise the income limit and raise 
or eliminate the asset test. A de facto elimination of the 
asset test through broad-based categorical eligibility saves 
administrative costs because state agencies do not have to 
devote staff time towards verifying assets, and makes it easier 
for families to apply for SNAP because they do not have to 
provide verification of their assets.''
    There was public outrage when the press reported that two 
lottery winners, both receiving more than $1 million in 
winnings, were also found to have been receiving SNAP 
assistance, even after collecting their winnings. When lottery 
winners choose to receive one lump sum payment for their 
winnings, that money is considered an asset. Under broad-based 
categorical eligibility, there are 38 states that do not verify 
assets when determining SNAP eligibility, thus creating a 
loophole for lottery winners and anyone with substantial 
assets. This reform to SNAP law would put an end to lottery 
winners receiving SNAP as states will have to review assets in 
determining SNAP eligibility.
    The Cincinnati Enquirer also printed an article that proves 
how wasteful states can be with taxpayer dollars when they 
implement broad-based categorical eligibility and no longer 
take into account assets. The article reports that a woman 
qualified for $500 a month in SNAP benefits after she lost her 
job, even though she had $80,000 in her bank account, a paid-
off $311,000 home, and a Mercedes.
    This provision would restrict categorical eligibility to 
only those households receiving cash assistance from SSI, TANF, 
or a state-run General Assistance program, saving taxpayers 
$11.7 billion over ten years. Merely, receiving a TANF-funded 
brochure or a referral to an ``800'' number telephone hotline 
would no longer automatically make a household SNAP eligible. 
It is estimated that 3.9 percent of the 46.4 million people 
currently enrolled in SNAP would be affected by this provision. 
Those who no longer have categorical eligibility status under 
the amended provision would have the opportunity to be reviewed 
for SNAP eligibility independent of their status as a TANF 
beneficiary. And those who receive cash assistance from SSI, 
TANF, or a state-run General Assistance program will still be 
categorically eligible for SNAP. By refining the eligibility 
requirements, this proposal ensures that those most in need 
will continue to receive assistance.
    Third, the Committee followed the example from the previous 
majority and agreed to terminate an artificial increase in SNAP 
benefits. The American Recovery and Reinvestment Act (ARRA) 
included an across-the-board increase in SNAP benefits 
effective in April 2009. The ARRA effectively replaced the 
increase in SNAP benefits that occurs based on annual food-
price inflation indexing. The ARRA benefit originally 
terminated after FY2018, when food-price inflation was 
estimated to ``catch up'' with the ARRA increase. The 
Congressional Budget Office (CBO) originally projected the ARRA 
increase to last through FY 2018 at an additional benefit cost 
of $57 billion.
    In the 111th Congress, when the Democrat majority needed to 
pay for other ``priorities,'' including a teacher's union 
bailout and increasing school meal standards, the ARRA SNAP 
increase was cut twice to offset these other two laws. They 
achieved their offsets by moving up the ARRA termination date 
to March 31, 2014, to cut $11.9 billion from SNAP to help pay 
for P.L. 111-226. Then they moved the ARRA termination date to 
October 31, 2013, to cut $2.5 billion from SNAP to help pay for 
P.L. 111-296. While many Democrats have talked about restoring 
these cuts, an overwhelming majority of Democrats voted for 
both the laws that benefited from an offset from SNAP benefits 
totaling almost $14.5 billion.
    This provision terminates the ARRA increase on July 1, 
2012, and reinstates the law that calculates SNAP benefits 
based on food-price inflation, rather than an arbitrary number. 
SNAP benefits will still be able to rise with the growing cost 
of food as stated in SNAP law. Rather than redirect these funds 
towards more bureaucracy, this provision will provide $5.9 
billion towards deficit reduction.
    Next, the Committee agreed to eliminate the cost share for 
the SNAP Employment and Training (E&T;) program. While States 
are technically required to provide E&T; programs, the program 
has been historically underutilized. For example, fewer than 7 
percent of all SNAP recipients participated in a SNAP E&T; 
program in FY2009.
    States have great flexibility in how they implement their 
program and who they serve; relatively few SNAP participants 
are subject to work requirements. Recently, almost half of the 
states have been exercising their authority to exempt all SNAP 
recipients from participation in E&T; and operate their programs 
on an entirely voluntary basis, which means participants are 
choosing whether or not they want to participate in this 
program.
    In addition to being underutilized, this program is 
duplicative. According to a GAO report from January 2011, 
almost all federal E&T; programs overlap with at least one other 
program in that they provide similar services to similar 
populations. GAO reported there are 47 federal E&T; programs at 
an annual cost of $18 billion.
    For the SNAP E&T; program, states receive a combination of 
formula grants and reimbursements for qualifying expenses. 
Currently, $90 million per year is allocated to the states 
under a formula to fund their respective E&T; programs. In 
addition to the formula grants, the federal government will 
provide reimbursements to states of up to 50 percent for 
administrative costs as well as E&T; participant expenses 
directly related to participation in the program. This portion 
of funding is referred to as the 50-50 cost share funds, and is 
not capped.
    Because the FY2012 Agriculture Appropriations Act reduced 
the federal grant funding from $90 million to $79 million, the 
Committee agreed to continue the grant funding at $79 million 
per the appropriations law. While the federal grant funding has 
been subject to rescissions, the Committee kept the formula 
grants to assist states in administering the program. However, 
the Committee eliminated the 50-50 cost share reimbursement for 
SNAP E&T.; States can continue to invest their own funding as 
well as leverage funding from the public and private sector as 
they currently do; this provision would no longer allow USDA to 
provide the reimbursement, saving taxpayers $3.1 billion over 
ten years.
    The Committee also passed a provision to eliminate indexing 
on the SNAP nutrition education program. States provide 
nutrition education to SNAP participants to encourage them to 
make healthy food choices within a limited budget and to choose 
a physically active lifestyle. Current funding for this program 
is $375 million and indexed for inflation each fiscal year. The 
Committee agreed to keep the base funding for this program and 
eliminate indexing, saving $546 million over ten years. Given 
the federal deficit, it is no longer fiscally responsible to 
allow programs to grow on ``auto-pilot'' year after year.
    Finally, the Committee eliminated state performance 
bonuses, saving $480 million over ten years. States are 
responsible for administering the SNAP program and it is their 
duty to process applications in a timely manner, ensure 
households receive the accurate amount of SNAP benefits, and 
make certain the program is administered in the most effective 
and efficient manner. When a state receives a bonus from USDA, 
there is no requirement that they reinvest the funds back into 
SNAP; it can simply be absorbed into the state's budget. In 
this economic climate it is very difficult to justify awarding 
states bonuses for practices that should be the daily operating 
procedure. This provision would end bonuses that are given to 
states for essentially doing their job.
    While the SNAP program comprises almost 80 percent of the 
Committee on Agriculture's mandatory spending, these reductions 
only account for about 3.5 percent of total spending over ten 
years. Every one of these provisions represents common sense 
and good government in a time that requires fiscal restraint. 
The Committee closed loopholes, reduced waste and abuse, and 
ended arbitrary policies that are artificially inflating the 
costs of the program.
    Some states have taken great liberties in administering the 
program, as encouraged by this Administration, and those 
practices must end. Encouraging states to stretch policies 
beyond the original intent of the law further proves this 
Administration has no regard for ensuring hard-earned taxpayer 
dollars are spent wisely.
    Other laws and programs have been circumventing SNAP law 
for far too long that simply add more costs to the program. 
These provisions return the program to the purpose of the 
original SNAP law and prevent other programs from becoming the 
de facto administrator of SNAP. The changes made to SNAP in the 
2008 farm bill remain fully intact and will continue to benefit 
SNAP participants.
    There is no denying that SNAP provides important support 
for many Americans and these provisions further protect that 
program. The Committee wants to ensure the integrity of this 
program so we can continue to provide nutrition assistance for 
those who are in need. Under these provisions, any household 
that qualifies for SNAP and meets the SNAP eligibility 
requirements will continue to be eligible for and receive 
benefits from the program. The Committee on Agriculture is 
better targeting the program to serve those in need while 
continuing the long standing tradition that the Committee has 
always been willing to do its part to ensure the fiscal well 
being of our nation.

                           Section-by-Section


Sec. 101. Short title

    Section 101 is the short title.

Sec. 102. ARRA Sunset at June 30, 2012

    Section 102 amends the American Recovery and Reinvestment 
Act of 2009 (ARRA) by terminating on July 1, 2012 the increased 
Supplemental Nutrition Assistance Program benefits provided 
under the Act.

Sec. 103. Categorical eligibility limited to cash assistance

    Section 103 amends the Food and Nutrition Act of 2008 to 
restrict categorical eligibility for the Supplemental Nutrition 
Assistance Program to only those households receiving cash 
assistance through other low-income assistance programs.

Sec. 104. Standard utility allowances based on the receipt of energy 
        assistance payments

    Section 104 amends the Food and Nutrition Act of 2008 by 
striking a provision that requires a state agency using a 
standard utility allowance to provide the allowance to each 
household that receives any payment under the Low Income Home 
Energy Assistance Act of 1981.

Sec. 105. Employment and training; workfare

    Section 105 amends the Food and Nutrition Act of 2008 by 
striking a provision that provides a cost share to states for 
certain expenses incurred in operating an employment and 
training program.

Sec. 106. End State Bonus Program for the Supplemental Nutrition 
        Assistance Program

    Section 106 amends the Food and Nutrition Act of 2008 by 
eliminating the performance bonuses provided to states for 
effectively administering the Supplemental Nutrition Assistance 
Program.

Sec. 107. Funding of employment and training programs

    Section 107 amends the Food and Nutrition Act of 2008 by 
reducing the allocation to State agencies to carry out 
employment and training programs for fiscal year 2013 to 
$79,000,000.

Sec. 108. Turn off indexing for nutrition education and obesity 
        prevention

    Section 108 amends the Food and Nutrition Act of 2008 by 
eliminating indexing on the Nutrition Education and Obesity 
Prevention Grant Program.

Sec. 109. Extension of Authorization of Food and Nutrition Act of 2008

    Section 109 amends the Food and Nutrition Act of 2008 by 
extending the authorization for appropriations to carry out the 
Act through fiscal year 2013.

Sec. 110. Effective dates and application of amendments

    Section 110 provides the effective dates of the amendments.

                        Committee Consideration

    The Committee on Agriculture met, pursuant to notice, with 
a quorum present, on April 18, 2012, to consider the 
Agricultural Reconciliation Act of 2012, with respect to the 
instructions provided under H. Con. Res. 112, the Concurrent 
Resolution on the Budget, as modified by H. Res. 614.
    Chairman Lucas offered an opening statement as did Ranking 
Member Peterson. Without objection the Agricultural 
Reconciliation Act was placed before the Committee for 
consideration, a first reading of the bill was waived and it 
was opened for amendment at any point.
    Discussion occurred and there being no amendments, Mr. 
Goodlatte offered a motion that the Committee favorably report 
the bill to the Committee on the Budget for insertion in the 
Reconciliation Bill. By voice vote, the motion was agreed to.
    Mr. Peterson reserved the right for minority views to be 
included with the report for submission to the Budget 
Committee.
    Chairman Lucas advised Members that pursuant to the rules 
of the House of Representatives that Members have 2 calendar 
days to file such views with the Committee.
    Without objection, staff were given permission to make any 
necessary clerical, technical or conforming changes to reflect 
the intent of the Committee.
    Chairman Lucas thanked all the Members and adjourned the 
meeting.

                  Reporting the Bill--Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the House of 
Representatives, Agricultural Reconciliation Act of 2012 was 
reported by voice vote with a majority quorum present. There 
was no request for a recorded vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee on Agriculture's 
oversight findings and recommendations are reflected in the 
body of this report.

                    Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objections of this legislation are to 
reduce spending within the jurisdiction of the Committee on 
Agriculture as required by H. Con. Res. 112, the Concurrent 
Resolution on the Budget for Fiscal Year 2013 and as modified 
by H. Res. 614.

                   Constitutional Authority Statement

    The Committee finds the Constitutional authority for this 
legislation in Article I, section 8, clause 18, that grants 
Congress the power to make all laws necessary and proper for 
carrying out the powers vested by Congress in the Constitution 
of the United States or in any department or officer thereof.

           Budget Act Compliance (Sections 308, 402, and 423)

    The provisions of clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives and section 308(a)(1) of the 
Congressional Budget Act of 1974 (relating to estimates of new 
budget authority, new spending authority, new credit authority, 
or increased or decreased revenues or tax expenditures) are not 
considered applicable. The estimate and comparison required to 
be prepared by the Director of the Congressional Budget Office 
under clause 3(c)(3) of rule XIII of the Rules of the House of 
Representatives and sections 402 and 423 of the Congressional 
Budget Act of 1974 submitted to the Committee prior to the 
filing of this report are as follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 23, 2012.
Hon. Frank D. Lucas,
Chairman, Committee on Agriculture,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the Agricultural 
Reconciliation Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
FitzGerald.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Agricultural Reconciliation Act of 2012

    Summary: The Agricultural Reconciliation Act of 2012 would 
make several changes to the Supplemental Nutrition Assistance 
Program (SNAP) and extend its authorization for one year. CBO 
estimates that enacting this legislation would reduce direct 
spending by $5.6 billion in 2013 and by $33.7 billion over the 
2013-2022 period, relative to CBO's March 2012 baseline 
projections. Those estimates are based on CBO's assumption that 
the legislation will be enacted on or near October 1, 2012.
    In addition, the Chairman of the House Committee on the 
Budget has directed CBO to prepare estimates assuming a July 1, 
2012, enactment date for this year's reconciliation proposals. 
If the legislation were enacted by that earlier date, some of 
the SNAP proposals would result in greater reductions in direct 
spending than those estimated assuming an October 1 enactment 
date. Under the alternative assumption of a July 1 enactment 
date, CBO estimates that the SNAP proposals would reduce direct 
spending by $7.8 billion over the 2012-2013 period and $35.8 
billion over the 2012-2022 period.
    The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the Agricultural Reconciliation Act of 2012 
is shown in the following table (on pages 2 and 3). The costs 
of this legislation fall within budget function 600 (income 
security)


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     By fiscal year, in millions of dollars--
                                                ------------------------------------------------------------------------------------------------------------------------------------------------
                                                    2012       2013       2014       2015       2016       2017       2018       2019       2020       2021        2022     2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT OCTOBER 1, 2012

Changes to SNAP Eligibility and Benefits:
    Standard Utility Allowances:
        Estimated Budget Authority.............          0       -750     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470       -1,470     -6,680    -13,980
        Estimated Outlays......................          0       -750     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470       -1,470     -6,680    -13,980
    Restrict Categorical Eligibility:
        Estimated Budget Authority.............          0       -620     -1,245     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170        1,155     -5,610    -11,520
        Estimated Outlays......................          0       -615     -1,240     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170        1,155     -5,600    -11,510
    Benefit Increase Sunset:a
        Estimated Budget Authority.............          0     -4,084       -289          0          0          0          0          0          0          0            0     -4,372     -4,372
        Estimated Outlays......................          0     -4,084       -289          0          0          0          0          0          0          0            0     -4,372     -4,372
    Interaction Effects:
        Estimated Budget Authority.............          0        140         25         20         20         20         20         20         20         20           20        225        325
        Estimated Outlays......................          0        140         25         20         20         20         20         20         20         20           20        225        325
Changes to Other SNAP Activities:
    Employment and Training:
        Estimated Budget Authority.............          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
        Estimated Outlays......................          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
    Awards and Grants:
        Estimated Budget Authority.............          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
        Estimated Outlays......................          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
    Total Changes in Direct Spending:
        Estimated Budget Authority.............          0     -5,638     -3,347     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -18,307    -33,694
        Estimated Outlays......................          0     -5,633     -3,342     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -18,297    -33,684

                                                                   CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT JULY 1, 2012
                                                            (Per the Direction of the Chairman of the House Committee on the Budget)

Changes to SNAP Eligibility and Benefits:
    Standard Utility Allowances:
        Estimated Budget Authority.............        -30     -1,070     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470        1,470     -7,030    -14,330
        Estimated Outlays......................        -30     -1,070     -1,470     -1,490     -1,500     -1,470     -1,450     -1,450     -1,460     -1,470        1,470     -7,030    -14,330
    Restrict Categorical Eligibility:
        Estimated Budget Authority.............        -25       -875     -1,245     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170       -1,155     -5,890    -11,800
        Estimated Outlays......................        -25       -870     -1,240     -1,255     -1,255     -1,235     -1,210     -1,195     -1,180     -1,170       -1,155     -5,880    -11,790
    Benefit Increase Sunset:a
        Estimated Budget Authority.............       -675     -5,000       -289          0          0          0          0          0          0          0            0     -5,963     -5,963
        Estimated Outlays......................       -675     -5,000       -289          0          0          0          0          0          0          0            0     -5,963     -5,963
    Interaction Effects:
        Estimated Budget Authority.............         10        205         25         20         20         20         20         20         20         20           20        300        400
        Estimated Outlays......................         10        205         25         20         20         20         20         20         20         20           20        300        400
Changes to Other SNAP Activities:
    Employment and Training:
        Estimated Budget Authority.............          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
        Estimated Outlays......................          0       -256       -295       -299       -305       -311       -317       -324       -331       -338         -346     -1,466     -3,121
    Awards and Grants:
        Estimated Budget Authority.............          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
        Estimated Outlays......................          0        -68        -74        -80        -87        -95       -104       -114       -124       -135         -145       -404     -1,026
    Total Changes in Direct Spending:
        Estimated Budget Authority.............       -720     -7,064     -3,347     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -20,453    -35,840
        Estimated Outlays......................       -720     -7,059     -3,342     -3,104     -3,127     -3,091     -3,061     -3,063     -3,075     -3,093       -3,096    -20,443    -35,830
Memorandum:
    Spending for SNAP Under CBO's March 2012        80,993     81,986     79,886     80,048     79,679     78,089     76,637     75,388     74,274     73,497       72,624    480,682   853,102
     Baseline..................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Components may not sum to totals because of rounding.
SNAP = Supplemental Nutrition Assistance Program.
aThe benefit increase, originally provided in the American Recovery and Reinvestment Act, was previously designated as spending for an emergency requirement.

    Basis of estimate: For the purposes of this estimate, CBO 
assumes the bill will be enacted on or near October 1, 2012, as 
shown in the first panel of the table (above). As directed by 
the Chairman of the House Budget Committee, CBO has also 
prepared a set of estimates based on the assumption that the 
legislation is enacted by July 1, 2012. Those alternative 
estimates are presented on the second panel of the table (on 
the next page).

Changes to SNAP Eligibility and Benefits

    The Agricultural Reconciliation Act of 2012 would make 
several changes to the amount of SNAP benefits that households 
receive as well as eligibility for the program. In particular, 
the legislation would change the terms for granting heating and 
cooling (utility) allowances under SNAP, restrict the automatic 
extension of SNAP eligibility for individuals in households 
that receive assistance under certain other federal programs, 
and accelerate the sunset date for enhanced SNAP benefits 
pursuant to a provision enacted in the American Recovery and 
Reinvestment Act of 2009 (ARRA). Together, those provisions 
would reduce direct spending by about $29.5 billion over the 
2012-2022 period, assuming enactment on October 1, 2012; and by 
about $31.7 billion over the same period under the July 1 
enactment assumption.
    Standard Utility Allowances. Under current law, households 
qualify for a Heating and Cooling Standard Utility Allowance 
(HCSUA) if they provide proof that they pay heating or cooling 
expenses or receive assistance through the Low-Income Home 
Energy Assistance Program (LIHEAP). The Agriculture Committee's 
proposal would eliminate the automatic qualification for those 
allowances for SNAP households who receive energy assistance. 
Some states currently send nominal LIHEAP benefit amounts 
(typically between $1 and $5, and typically only once per year) 
to SNAP participants to automatically qualify them for the 
utility allowance. The value of the HCSUA is used, along with 
other factors, to determine the amount of housing expenses that 
households can deduct from their income.
    The legislation would eliminate that automatic 
qualification and require all households to provide proof that 
they paid heating or cooling expenses to claim the utility 
allowance. CBO estimates that under this provision about 1.3 
million households would have their SNAP benefits reduced by an 
average of $90 per month. CBO estimates that about 80 percent 
of households with reduced benefits would be those that qualify 
for the HCSUA under current law through their receipt of 
nominal LIHEAP benefits (as described above). We estimate that 
this provision would reduce direct spending by $14.0 billion 
over the 2012-2022 period, assuming enactment on October 1, 
2012. (Assuming a July 1, 2012, enactment date, CBO estimates 
that this provision would reduce direct spending by $14.3 
billion over the 2012-2022 period.)
    Restrict Categorical Eligibility. Individuals in households 
in which all members receive cash assistance from the Temporary 
Assistance to Needy Families Program (TANF), Supplemental 
Security Income, or similar state cash assistance programs are 
considered automatically eligible for SNAP and are not subject 
to the program's income and asset requirements. States 
currently have the option to extend such categorical 
eligibility to households that receive or are eligible to 
receive non-cash services through TANF.
    The legislation would restrict categorical eligibility to 
only households receiving cash assistance. Based on data from 
the Department of Agriculture, CBO estimates that about 1.8 
million people per year, on average, would lose benefits if 
they were subject to SNAP's income and asset tests. In 
addition, about 280,000 school-age children in those households 
would no longer be automatically eligible for free school meals 
through their receipt of SNAP benefits. Assuming enactment on 
October 1, 2012, CBO estimates that this provision would lower 
direct spending by $11.5 billion over the 2012-2022 period. (We 
estimate the reduction would be $11.8 billion for a July 1, 
2012, enactment date.)
    Benefit Increase Sunset. The maximum SNAP benefit is 
determined by the cost of the Thrifty Food Plan--a basket of 
goods selected by the Department of Agriculture to provide a 
nutritious diet--published in June of each year. The American 
Recovery and Reinvestment Act of 2009 raised the maximum SNAP 
benefit in 2009 by 13.6 percent and held it at that amount 
until the annual inflation adjustment exceeded that amount. 
Subsequent legislation established a sunset date of October 31, 
2013, for this increase. ARRA designated this temporary benefit 
increase as an emergency requirement.
    The legislation would accelerate the sunset date for the 
ARRA benefit increase to June 30, 2012. Based on discussions 
with states, CBO expects that states would need about two 
months to implement the benefit calculation change in their 
payment systems. As a result, we assume that the effective date 
for the change in benefits will be after August 31, 2012. CBO 
estimates that in fiscal year 2013, the maximum benefit for a 
household of four would be $34 lower than it would have been 
under current law. In total, CBO estimates enacting this 
provision would reduce direct spending by nearly $6.0 billion 
if the legislation is enacted by July 1, 2012, but the savings 
would drop to $4.4 billion if the legislation is not enacted 
until October 1, 2012.
    Interaction Effects. Changes to standard utility allowances 
and benefit amounts set by ARRA would reduce benefit amounts 
that households receive; restricting categorical eligibility 
would reduce the total number of households receiving SNAP. 
Therefore, the estimated savings from each provision would be 
reduced if all three were enacted simultaneously. Accounting 
for the interactions of those provisions, CBO estimates that 
the total savings would decline by $325 million over the 2013-
2022 period for an assumed enactment on October 1, 2012. (CBO 
estimates that the interaction effect would be $400 million for 
the July 1 enactment date.)

Changes to Other SNAP Activities

    The Agricultural Reconciliation Act of 2012 also would make 
changes to the level of administrative and award funding under 
SNAP. Finally, it would reauthorize SNAP through fiscal year 
2013. Those changes would reduce direct spending by about $4.1 
billion over the 2012-2022 period for both enactment date 
assumptions.
    Employment and Training Funding. Under current law, states 
receive a base grant to fund employment and training activities 
for SNAP participants. In addition, the federal government 
shares costs above that amount with states on a matching basis. 
The legislation would eliminate the authority for the federal 
government to provide such additional funds above the base 
grant level. As a result of that reduction in funding, CBO 
estimates that a small number of nondisabled adults without 
children, who are subject to a work requirement in order to 
receive SNAP benefits, would lose eligibility if states scale 
back their employment and training activities. In total, CBO 
estimates that this provision would lower direct spending by 
$3.1 billion over the 2012-2022 period.
    Awards and Grants. The proposal also would eliminate $48 
million in annual funding for awards to states with high or 
improved performance in administering SNAP. The legislation 
also would eliminate the annual inflation adjustment of grants 
to states for nutrition education. CBO estimates that these two 
provisions together would reduce direct spending by $1.0 
billion over the 2012-2022 period.
    Program Extensions. The Food, Conservation, and Energy Act 
of 2008 authorized SNAP through 2012. The reconciliation 
proposal would extend the program through the end of fiscal 
year 2013. Under the assumptions underlying CBO's March 2012 
baseline projections, we estimate that extending the program 
for one year would result in outlays of $82 billion in 2013. 
Pursuant to the Balanced Budget and Emergency Deficit Control 
Act of 1985, this extension is assumed in CBO's current 
baseline projections and has no cost relative to that baseline.
    Estimated impact on state, local, and tribal governments: 
For large entitlement programs such as SNAP, UMRA defines an 
increase in the stringency of conditions as an 
intergovernmental mandate if the affected governments lack 
authority to offset those costs while continuing to provide 
required services. The legislation would decrease federal 
payments to states for administering employment and training 
services under SNAP. CBO estimates that the decrease in federal 
aid would total $256 million in 2013 and $3.1 billion over the 
2012-2022 period. However, because states have flexibility to 
amend their employment and training services to offset those 
costs, the decrease in federal aid would not impose an 
intergovernmental mandate as defined in UMRA.
    Estimated impact on the private sector: The legislation 
contains no new private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal Costs: Kathleen FitzGerald 
and Emily Holcombe; Impact on State, Local, and Tribal 
Governments: Lisa Ramirez-Branum; Impact on the Private Sector: 
Jimmy Jin.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

           *       *       *       *       *       *       *


DIVISION A--APPROPRIATIONS PROVISIONS

           *       *       *       *       *       *       *


                     GENERAL PROVISIONS--THIS TITLE

  Sec. 101. Temporary Increase in Benefits Under the 
Supplemental Nutrition Assistance Program. (a) Maximum Benefit 
Increase.--
          (1) * * *
          (2) Termination.--The authority provided by this 
        subsection shall terminate after [October 31, 2013] 
        June 30, 2012.

           *       *       *       *       *       *       *

                              ----------                              


FOOD AND NUTRITION ACT OF 2008

           *       *       *       *       *       *       *


                          ELIGIBLE HOUSEHOLDS

  Sec. 5. (a) Participation in the supplemental nutrition 
assistance program shall be limited to those households whose 
incomes and other financial resources, held singly or in joint 
ownership, are determined to be a substantial limiting factor 
in permitting them to obtain a more nutritious diet. 
Notwithstanding any other provisions of this Act except 
sections 6(b), 6(d)(2), and 6(g) and section 3(n)(4), 
[households in which each member receives benefits] households 
in which each member receives cash assistance under a State 
program funded under part A of title IV of the Social Security 
Act (42 U.S.C. 601 et seq.), supplemental security income 
benefits under title XVI of the Social Security Act, or aid to 
the aged, blind, or disabled under title I, X, XIV, or XVI of 
the Social Security Act, shall be eligible to participate in 
the supplemental nutrition assistance program. Except for 
sections 6, 16(e)(1), and section 3(n)(4), households in which 
each member receives benefits under a State or local general 
assistance program that complies with standards established by 
the Secretary for ensuring that the program is based on income 
criteria comparable to or more restrictive than those under 
subsection (c)(2), and not limited to one-time emergency 
payments that cannot be provided for more than one consecutive 
month, shall be eligible to participate in the supplemental 
nutrition assistance program. Assistance under this program 
shall be furnished to all eligible households who make 
application for such participation.

           *       *       *       *       *       *       *

  (e) Deductions From Income.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Excess shelter expense deduction.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Standard utility allowance.--
                          (i) * * *

           *       *       *       *       *       *       *

                          [(iv) Availability of allowance to 
                        recipients of energy assistance.--
                                  [(I) In general.--Subject to 
                                subclause (II), if a State 
                                agency elects to use a standard 
                                utility allowance that reflects 
                                heating or cooling costs, the 
                                standard utility allowance 
                                shall be made available to 
                                households receiving a payment, 
                                or on behalf of which a payment 
                                is made, under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.) 
                                or other similar energy 
                                assistance program, if the 
                                household still incurs out-of-
                                pocket heating or cooling 
                                expenses in excess of any 
                                assistance paid on behalf of 
                                the household to an energy 
                                provider.
                                  [(II) Separate allowance.--A 
                                State agency may use a separate 
                                standard utility allowance for 
                                households on behalf of which a 
                                payment described in subclause 
                                (I) is made, but may not be 
                                required to do so.
                                  [(III) States not electing to 
                                use separate allowance.--A 
                                State agency that does not 
                                elect to use a separate 
                                allowance but makes a single 
                                standard utility allowance 
                                available to households 
                                incurring heating or cooling 
                                expenses (other than a 
                                household described in 
                                subclause (I) or (II) of clause 
                                (ii)) may not be required to 
                                reduce the allowance due to the 
                                provision (directly or 
                                indirectly) of assistance under 
                                the Low-Income Home Energy 
                                Assistance Act of 1981 (42 
                                U.S.C. 8621 et seq.).
                                  [(IV) Proration of 
                                assistance.--For the purpose of 
                                the supplemental nutrition 
                                assistance program, assistance 
                                provided under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.) 
                                shall be considered to be 
                                prorated over the entire 
                                heating or cooling season for 
                                which the assistance was 
                                provided.]

           *       *       *       *       *       *       *

  (j) Notwithstanding subsections (a) through (i), a State 
agency shall consider a household member who receives 
supplemental security income benefits under title XVI of the 
Social Security Act (42 U.S.C. 1382 et seq.), aid to the aged, 
blind, or disabled under title I, II, X, XIV, or XVI of such 
Act (42 U.S.C. 301 et seq.), [or who receives benefits under a 
State program] or who receives cash assistance under a State 
program funded under part A of title IV of the Act (42 U.S.C. 
601 et seq.) to have satisfied the resource limitations 
prescribed under subsection (g).
  (k)(1) * * *

           *       *       *       *       *       *       *

          [(4) Third party energy assistance payments.--
                  [(A) Energy assistance payments.--For 
                purposes of subsection (d)(1), a payment made 
                under a State law (other than a law referred to 
                in paragraph (2)(H)) to provide energy 
                assistance to a household shall be considered 
                money payable directly to the household.
                  [(B) Energy assistance expenses.--For 
                purposes of subsection (e)(6), an expense paid 
                on behalf of a household under a State law to 
                provide energy assistance shall be considered 
                an out-of-pocket expense incurred and paid by 
                the household.]
          (4) Third party energy assistance payments.--For 
        purposes of subsection (d)(1), a payment made under a 
        State law (other than a law referred to in paragraph 
        (2)(G)) to provide energy assistance to a household 
        shall be considered money payable directly to the 
        household.

           *       *       *       *       *       *       *


            ADMINISTRATIVE COST-SHARING AND QUALITY CONTROL

  Sec. 16. (a) Subject to subsection (k), the Secretary is 
authorized to pay to each State agency an amount equal to 50 
per centum of all administrative costs involved in each State 
agency's operation of the supplemental nutrition assistance 
program (other than a program carried out under section 6(d)(4) 
or section 20), which costs shall include, but not be limited 
to, the cost of (1) the certification of applicant households, 
(2) the acceptance, storage, protection, control, and 
accounting of benefits after their delivery to receiving points 
within the State, (3) the issuance of benefits to all eligible 
households, (4) informational activities relating to the 
supplemental nutrition assistance program, including those 
undertaken under section 11(e)(1)(A), but not including 
recruitment activities, (5) fair hearings, (6) automated data 
processing and information retrieval systems subject to the 
conditions set forth in subsection (g), (7) supplemental 
nutrition assistance program investigations and prosecutions, 
and (8) implementing and operating the immigration status 
verification system established under section 1137(d) of the 
Social Security Act (42 U.S.C. 1320b-7(d)): Provided, That the 
Secretary is authorized at the Secretary's discretion to pay 
any State agency administering the supplemental nutrition 
assistance program on all or part of an Indian reservation 
under section 11(d) of this Act or in a Native village within 
the State of Alaska identified in section 11(b) of Public Law 
92-203, as amended. such amounts for administrative costs as 
the Secretary determines to be necessary for effective 
operation of the supplemental nutrition assistance program, as 
well as to permit each State to retain 35 percent of the value 
of all funds or allotments recovered or collected pursuant to 
sections 6(b) and 13(c) and 20 percent of the value of any 
other funds or allotments recovered or collected, except the 
value of funds or allotments recovered or collected that arise 
from an error of a State agency. The officials responsible for 
making determinations of ineligibility under this Act shall not 
receive or benefit from revenues retained by the State under 
the provisions of this subsection.

           *       *       *       *       *       *       *

  [(d) Bonuses for States That Demonstrate High or Most 
Improved Performance.--
          [(1) Fiscal years 2003 and 2004.--
                  [(A) Guidance.--With respect to fiscal years 
                2003 and 2004, the Secretary shall establish, 
                in guidance issued to State agencies not later 
                than October 1, 2002--
                          [(i) performance criteria relating 
                        to--
                                  [(I) actions taken to correct 
                                errors, reduce rates of error, 
                                and improve eligibility 
                                determinations; and
                                  [(II) other indicators of 
                                effective administration 
                                determined by the Secretary; 
                                and
                          [(ii) standards for high and most 
                        improved performance to be used in 
                        awarding performance bonus payments 
                        under subparagraph (B)(ii).
                  [(B) Performance bonus payments.--With 
                respect to each of fiscal years 2003 and 2004, 
                the Secretary shall--
                          [(i) measure the performance of each 
                        State agency with respect to the 
                        criteria established under subparagraph 
                        (A)(i); and
                          [(ii) subject to paragraph (3), award 
                        performance bonus payments in the 
                        following fiscal year, in a total 
                        amount of $48,000,000 for each fiscal 
                        year, to State agencies that meet 
                        standards for high or most improved 
                        performance established by the 
                        Secretary under subparagraph (A)(ii).
          [(2) Fiscal years 2005 and thereafter.--
                  [(A) Regulations.--With respect to fiscal 
                year 2005 and each fiscal year thereafter, the 
                Secretary shall--
                          [(i) establish, by regulation, 
                        performance criteria relating to--
                                  [(I) actions taken to correct 
                                errors, reduce rates of error, 
                                and improve eligibility 
                                determinations; and
                                  [(II) other indicators of 
                                effective administration 
                                determined by the Secretary;
                          [(ii) establish, by regulation, 
                        standards for high and most improved 
                        performance to be used in awarding 
                        performance bonus payments under 
                        subparagraph (B)(ii); and
                          [(iii) before issuing proposed 
                        regulations to carry out clauses (i) 
                        and (ii), solicit ideas for performance 
                        criteria and standards for high and 
                        most improved performance from State 
                        agencies and organizations that 
                        represent State interests.
                  [(B) Performance bonus payments.--With 
                respect to fiscal year 2005 and each fiscal 
                year thereafter, the Secretary shall--
                          [(i) measure the performance of each 
                        State agency with respect to the 
                        criteria established under subparagraph 
                        (A)(i); and
                          [(ii) subject to paragraph (3), award 
                        performance bonus payments in the 
                        following fiscal year, in a total 
                        amount of $48,000,000 for each fiscal 
                        year, to State agencies that meet 
                        standards for high or most improved 
                        performance established by the 
                        Secretary under subparagraph (A)(ii).
          [(3) Prohibition on receipt of performance bonus 
        payments.--A State agency shall not be eligible for a 
        performance bonus payment with respect to any fiscal 
        year for which the State agency has a liability amount 
        established under subsection (c)(1)(C).
          [(4) Payments not subject to judicial review.--A 
        determination by the Secretary whether, and in what 
        amount, to award a performance bonus payment under this 
        subsection shall not be subject to administrative or 
        judicial review.]

           *       *       *       *       *       *       *

  (h) Funding of Employment and Training Programs.--
          (1) * * *
  [(2) If, in carrying out such program during such fiscal 
year, a State agency incurs costs that exceed the amount 
allocated to the State agency under paragraph (1), the 
Secretary shall pay such State agency an amount equal to 50 per 
centum of such additional costs, subject to the first 
limitation in paragraph (3), including the costs for case 
management and casework to facilitate the transition from 
economic dependency to self-sufficiency through work.
  [(3) The Secretary shall also reimburse each State agency in 
an amount equal to 50 per centum of the total amount of 
payments made or costs incurred by the State agency in 
connection with transportation costs and other expenses 
reasonably necessary and directly related to participation in 
an employment and training program under section 6(d)(4), 
except that the amount of the reimbursement for dependent care 
expenses shall not exceed an amount equal to the payment made 
under section 6(d)(4)(I)(i)(II) but not more than the 
applicable local market rate, and such reimbursement shall not 
be made out of funds allocated under paragraph (1).]
  [(4)] (2) Funds provided to a State agency under this 
subsection may be used only for operating an employment and 
training program under section 6(d)(4), and may not be used for 
carrying out other provisions of this Act.
  [(5)] (3) The Secretary shall monitor the employment and 
training programs carried out by State agencies under section 
6(d)(4) to measure their effectiveness in terms of the increase 
in the numbers of household members who obtain employment and 
the numbers of such members who retain such employment as a 
result of their participation in such employment and training 
programs.

           *       *       *       *       *       *       *


                RESEARCH, DEMONSTRATION, AND EVALUATIONS

  Sec. 17. (a) * * *
  (b)(1)(A) * * *
                  (B) Project requirements.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) Impermissible projects.--The 
                        Secretary may not conduct a project 
                        under subparagraph (A) that--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) is inconsistent with--
                                          (aa) * * *

           *       *       *       *       *       *       *

                                          (hh) subsection (a), 
                                        (c), [(g), (h)(2), or 
                                        (h)(3)] or (g) of 
                                        section 16;

           *       *       *       *       *       *       *


                    AUTHORIZATION FOR APPROPRIATIONS

  Sec. 18. (a)(1) To carry out this Act, there are authorized 
to be appropriated such sums as are necessary for each of 
fiscal years 2008 through [2012] 2013. Not to exceed one-fourth 
of 1 per centum of the previous year's appropriation is 
authorized in each such fiscal year to carry out the provisions 
of section 17 of this Act, subject to paragraph (3).

           *       *       *       *       *       *       *


                                WORKFARE

  Sec. 20. (a) * * *

           *       *       *       *       *       *       *

  [(g)(1) The Secretary shall pay to each operating agency 50 
per centum of all administrative expenses incurred by such 
agency in operating a workfare program, including 
reimbursements to participants for work-related expenses as 
described in subsection (d)(3) of this section.
  [(2)(A) From 50 per centum of the funds saved from employment 
related to a workfare program operated under this section, the 
Secretary shall pay to each operating agency an amount not to 
exceed the administrative expenses described in paragraph (1) 
for which no reimbursement is provided under such paragraph.
  [(B) For purposes of subparagraph (A), the term ``funds saved 
from employment related to a workfare program operated under 
this section'' means an amount equal to three times the dollar 
value of the decrease in allotments issued to households, to 
the extent that such decrease results from wages received by 
members of such households for the first month of employment 
beginning after the date such members commence such employment 
if such employment commences--
          [(i) while such members are participating for the 
        first time in a workfare program operated under this 
        section; or
          [(ii) in the thirty-day period beginning on the date 
        such first participation is terminated.
  [(3) The Secretary may suspend or cancel some or all of these 
payments, or may withdraw approval from a political subdivision 
to operate a workfare program, upon a finding that the 
subdivision has failed to comply with the workfare 
requirements.]

           *       *       *       *       *       *       *


                  MINNESOTA FAMILY INVESTMENT PROJECT

  Sec. 22. (a) * * *

           *       *       *       *       *       *       *

  (d) Funding.--
          (1) If an application submitted under subsection (a) 
        complies with the requirements specified in subsection 
        (b), then the Secretary shall--
                  (A) * * *
                  (B) subject to subsection (b)(12) from the 
                funds appropriated under this Act provide grant 
                awards and pay the State each calendar quarter 
                for--
                          (i) * * *
                          (ii) the administrative costs 
                        incurred by the State to provide food 
                        assistance under the Project that are 
                        authorized under subsections (a)[, (g), 
                        (h)(2), and (h)(3)] and (g) of section 
                        16 equal to the amount that otherwise 
                        would have been paid under such 
                        subsections had the Project not been 
                        implemented, as estimated under a 
                        methodology satisfactory to the 
                        Secretary after negotiations with the 
                        State: Provided, That payments made 
                        under subsection (g) of section 16 
                        shall equal payments that would have 
                        been made if the Project had not been 
                        implemented.

           *       *       *       *       *       *       *


SEC. 28. NUTRITION EDUCATION AND OBESITY PREVENTION GRANT PROGRAM.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Funding.--
          (1) In general.--Of funds made available each fiscal 
        year under section 18(a)(1), the Secretary shall 
        reserve for allocation to State agencies to carry out 
        the nutrition education and obesity prevention grant 
        program under this section, to remain available for 
        obligation for a period of 2 fiscal [years--
                  [(A) for fiscal year 2011, $375,000,000; and
                  [(B) for fiscal year 2012 and each subsequent 
                fiscal year, the applicable amount during the 
                preceding fiscal year, as adjusted to reflect 
                any increases for the 12-month period ending 
                the preceding June 30 in the Consumer Price 
                Index for All Urban Consumers published by the 
                Bureau of Labor Statistics of the Department of 
                Labor.
          [(2) Allocation.--
                  [(A) Initial allocation.--Of the funds set 
                aside under paragraph (1), as determined by the 
                Secretary--
                          [(i) for each of fiscal years 2011 
                        through 2013, 100 percent shall be 
                        allocated to State agencies in direct 
                        proportion to the amount of funding 
                        that the State received for carrying 
                        out section 11(f) (as that section 
                        existed on the day before the date of 
                        enactment of this section) during 
                        fiscal year 2009, as reported to the 
                        Secretary as of February 2010; and
                          [(ii) subject to a reallocation under 
                        subparagraph (B)--
                                  [(I) for fiscal year 2014--
                                          [(aa) 90 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 10 percent 
                                        shall be allocated to 
                                        State agencies based on 
                                        the respective share of 
                                        each State of the 
                                        number of individuals 
                                        participating in the 
                                        supplemental nutrition 
                                        assistance program 
                                        during the 12-month 
                                        period ending the 
                                        preceding January 31;
                                  [(II) for fiscal year 2015--
                                          [(aa) 80 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 20 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb);
                                  [(III) for fiscal year 2016--
                                          [(aa) 70 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 30 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb);
                                  [(IV) for fiscal year 2017--
                                          [(aa) 60 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 40 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb); and
                                  [(V) for fiscal year 2018 and 
                                each fiscal year thereafter--
                                          [(aa) 50 percent 
                                        shall be allocated to 
                                        State agencies in 
                                        accordance with clause 
                                        (i); and
                                          [(bb) 50 percent 
                                        shall be allocated in 
                                        accordance with 
                                        subclause (I)(bb).
                  [(B) Reallocation.--
                          [(i) In general.--If the Secretary 
                        determines that a State agency will not 
                        expend all of the funds allocated to 
                        the State agency for a fiscal year 
                        under paragraph (1) or in the case of a 
                        State agency that elects not to receive 
                        the entire amount of funds allocated to 
                        the State agency for a fiscal year, the 
                        Secretary shall reallocate the 
                        unexpended funds to other States during 
                        the fiscal year or the subsequent 
                        fiscal year (as determined by the 
                        Secretary) that have approved State 
                        plans under which the State agencies 
                        may expend the reallocated funds.
                          [(ii) Effect of additional funds.--
                                  [(I) Funds received.--Any 
                                reallocated funds received by a 
                                State agency under clause (i) 
                                for a fiscal year shall be 
                                considered to be part of the 
                                fiscal year 2009 base 
                                allocation of funds to the 
                                State agency for that fiscal 
                                year for purposes of 
                                determining allocation under 
                                subparagraph (A) for the 
                                subsequent fiscal year.
                                  [(II) Funds surrendered.--Any 
                                funds surrendered by a State 
                                agency under clause (i) shall 
                                not be considered to be part of 
                                the fiscal year 2009 base 
                                allocation of funds to a State 
                                agency for that fiscal year for 
                                purposes of determining 
                                allocation under subparagraph 
                                (A) for the subsequent fiscal 
                                year.
          [(3) Limitation on federal financial participation.--
                  [(A) In general.--Grants awarded under this 
                section shall be the only source of Federal 
                financial participation under this Act in 
                nutrition education and obesity prevention.
                  [(B) Exclusion.--Any costs of nutrition 
                education and obesity prevention in excess of 
                the grants authorized under this section shall 
                not be eligible for reimbursement under section 
                16(a).] years, $375,000,000.

           *       *       *       *       *       *       *

                              ----------                              


LOW-INCOME HOME ENERGY ASSISTANCE ACT OF 1981

           *       *       *       *       *       *       *


TITLE XXVI--LOW-INCOME HOME ENERGY ASSISTANCE

           *       *       *       *       *       *       *


                     APPLICATIONS AND REQUIREMENTS

  Sec. 2605. (a) * * *

           *       *       *       *       *       *       *

  (f)(1) * * *
  (2) For purposes of paragraph (1) of this subsection [and for 
purposes of determining any excess shelter expense deduction 
under section 5(e) of the Food and Nutrition Act of 2008 (7 
U.S.C. 2014(e))]--
          (A) the full amount of such payments or allowances 
        shall be deemed to be expended by such household for 
        heating or cooling expenses, without regard to whether 
        such payments or allowances are provided directly to, 
        or indirectly for the benefit of, such household, 
        except that such payments or allowances shall not be 
        deemed to be expended for purposes of determining any 
        excess shelter expense deduction under section 5(e)(6) 
        of the Food and Nutrition Act of 2008 (7 U.S.C. 
        2014(e)(6)); and

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    The House Agriculture Committee takes seriously its 
oversight role for both sound safety net policies for farmers 
and adequate nutrition programs for low-income households. 
However, the Budget Reconciliation Act of 2012 and the process 
under which it comes before our Committee in no way reflect the 
true gravity of this trust.
    Without the benefit of a single hearing this year, the 
Budget Reconciliation Act of 2012 would make major alterations 
to the largest program within our jurisdiction, threatening the 
welfare of those for whom this program was created. SNAP 
participation has grown from 28 million participants at the 
time of the 2008 Farm Bill to more than 46 million participants 
today. This growth is not the result of any Congressional 
action but rather the growing need due to our ailing economy. 
The Congressional Budget Office estimates that SNAP demand will 
peak in 2013 and then fall, reacting to the nation's economic 
recovery.
    The budget resolution the House passed in March, H. Con 
Res. 112, was not a serious budget document but a political 
exercise that resulted from a partisan division over defense 
cuts. It reflects none of the bipartisanship for which our 
committee is known and is not a legitimate deficit reduction 
measure.
    A serious conversation about getting our nation's fiscal 
house in order cannot occur without putting everything on the 
table, including defense spending and revenue. It is simply 
irresponsible to attempt to balance the budget on the backs of 
the hardworking Americans that rely on the safety net SNAP 
provides.
    The SNAP fraud rate is at an all-time low and is operating 
more efficiently than many other government programs. There may 
be further inefficiencies that can be addressed by this 
Committee, but we have not had the adequate time needed for a 
thorough program review.
    We stand committed to having a serious conversation about 
our deficit reduction and are willing to consider all budget 
areas under this Committee's jurisdiction, however the cuts 
contained in the Budget Reconciliation Act of 2012 would leave 
millions of American families, children and seniors hungry.

                                   Collin Peterson.
                                   Bill Owens.
                                   Leonard Boswell.
                                   Gregorio Kilili Camacho Sablan.
                                   Chellie Pingree.
                                   Jim McGovern.
                                   Marcia Fudge.
                                   Jim Costa.
                                   Terri A. Sewell.
                                   David Scott.
                                   Henry Cuellar.
                                   Kurt Schrader.
                                   Peter Welch.
                                   Tim Walz.
                                   Joe Courtney.
                                   Joe Baca.
             TITLE II--THE COMMITTEE ON ENERGY AND COMMERCE
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
                          Committee on Energy and Commerce,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, Committee on the Budget,
House of Representatives, Washington, DC.
    Dear Chairman Ryan: Pursuant to section 201(a) of the 
Concurrent Resolution on the Budget for Fiscal Year 2013, I 
hereby transmit these recommendations which have been approved 
by vote of the Committee on Energy and Commerce, and the 
appropriate accompanying material including additional, 
supplemental or dissenting views, to the House Committee on the 
Budget. This submission is in order to comply with 
reconciliation directives included in H. Con. Res. 112, the 
fiscal year 2013 budget resolution and is consistent with 
section 310 of the Congressional Budget and Impoundment Control 
Act of 1974.
            Sincerely,
                                                Fred Upton,
                                                          Chairman.
                           TABLE OF CONTENTS

                               __________
                                                                   Page
Purpose and Summary..............................................    49
Background and Need for Legislation..............................    49
Hearings.........................................................    56
Committee Consideration..........................................    57
Committee Votes..................................................    57
Committee Oversight Findings.....................................    78
Statement of General Performance Goals and Objectives............    78
New Budget Authority, Entitlement Authority, and Tax Expenditures    78
Earmark..........................................................    78
Committee Cost Estimate..........................................    78
Congressional Budget Office Estimate.............................    78
Federal Mandates Statement.......................................    88
Advisory Committee Statement.....................................    88
Constitutional Authority Statement...............................    88
Applicability to Legislative Branch..............................    88
Section-by-Section Analysis of the Legislation...................    88
Changes in Existing Law Made by the Bill, as Reported............    92
Dissenting Views.................................................   108

TITLE II--REPEAL OF CERTAIN ACA FUNDING PROVISIONS; MEDICAID; LIABILITY 
                                 REFORM

                          Purpose and Summary

    The purpose of these Committee Prints is to rein in 
mandatory spending to avoid a debt crisis. The Committee Prints 
also comply with the reconciliation directive included in 
section 201 of H. Con. Res. 112, establishing the budget for 
the United States Government for fiscal year 2013 and setting 
forth appropriate budgetary levels for fiscal years 2014 
through 2022, and is consistent with section 310 of the 
Congressional Budget and Impoundment Control Act of 1974.

                  Background and Need for Legislation

Reining in Irresponsible Spending
    Section 1311(a) of the Patient Protection and Affordable 
Care Act (PPACA) provides the Secretary of Health and Human 
Services (HHS) a direct appropriation of such sums as necessary 
for grants to States to establish exchanges and facilitate the 
purchase of qualified health plans. The size of the direct 
appropriation is solely determined by the Secretary. The 
Secretary can determine the amount of spending and spend the 
funds without further Congressional action. The proposed 
legislation would strike the unlimited direct appropriation and 
rescind any unobligated funds.
    The Congressional Research Service's (CRS) American Law 
Division confirmed these facts in a February 7, 2011 memo, 
stating that ``the total amount of money the Secretary may 
expend for grants to the states under this section is 
indefinite.'' CRS further stated that ``[t]his section thus 
comprises both an authorization and an appropriation of federal 
funds and as such, it does not require any further 
congressional action to constitute an effective 
appropriation.''
    Section 1311(a) funds could be used by States for 
activities related to developing State insurance exchanges, 
which could include hiring and retaining hundreds of employees 
to establish their State exchanges, such as brokers, 
advertisers, and customer service agents. Grants under this 
language can be used to ``facilitate enrollment'' into exchange 
plans. However, this term is undefined in the statute and could 
allow the funds to go towards any activity the Secretary 
determines could ``facilitate'' enrollment. The vague 
definition of ``facilitate'' is especially troubling in light 
of the unlimited appropriation provided to the Secretary.
    Section 1322 of PPACA created the Consumer Operated and 
Oriented Plan (CO-OP) program to provide government-subsidized 
loans to qualified non-profit health insurance plans. The law 
also appropriated $6 billion for startup and solvency loans 
under the program.
    Analysis of the CO-OP program has raised serious concerns 
about the liability that taxpayers face from this PPACA loan 
program. The Office of Management and Budget (OMB) estimates of 
potential taxpayer losses are troubling. In the proposed rule 
for CO-OPs issued on July 20, 2011 (76 FR 43237), OMB estimated 
that up to ``50 percent of all loans'' will not be repaid--
jeopardizing hundreds of millions of taxpayer dollars.
    Some awardees also include unions who appear to fail to 
meet basic eligibility criteria, such as the statutory 
requirement that award recipients not include health insurers 
or related entities in existence before July 16, 2009.
    Partially in response to such concerns, Congress reduced 
the appropriation available for the program to $3.8 billion in 
H.R. 1473, the continuing resolution for fiscal year 2011. 
Given these facts, it is appropriate for Congress to rescind 
the entire unobligated balance available for the program to 
help address runaway federal spending and limit taxpayer losses 
under the program.
    Section 4002 of PPACA created the Prevention and Public 
Health Fund, a $17.75 billion account (fiscal year 2012 to 
fiscal year 2021) administered by the Secretary of HHS to 
provide for ``expanded and sustained national investment in 
prevention and public health programs to improve health and 
help restrain the rate of growth in private and public sector 
health care costs.''
    Section 4002 appropriates $1 billion for fiscal year 2012; 
$1.25 billion for fiscal year 2013; $1.5 billion for fiscal 
year 2014; $2 billion for fiscal year 2015; and each fiscal 
year thereafter in perpetuity. Although the amount of the fund 
was reduced in the Middle Class Tax Relief and Job Creation Act 
passed in February 2012, the fund remains nothing more than a 
slush fund controlled entirely by the Secretary of HHS that can 
be spent without further Congressional oversight and severely 
hampers robust oversight of the program.
    Providing an advanced appropriation limits Congressional 
oversight of spending under the Public Health Service Act and 
results in the Federal funding of signs, bike paths, and dog 
neutering. Rather than provide the Secretary a large 
appropriation with broad discretion, the Committee believes 
Congress should identify worthy public health service programs 
and authorize them at appropriate levels. Congress can then set 
fiscal priorities by subsequently providing funding through the 
appropriations process after weighing the relative value of 
different programs.
Medicaid
    For both the Federal and State governments, Medicaid is the 
largest health care spender of general-revenue funds. The CBO's 
recent estimates show that the Federal government will spend 
over $5 trillion on Medicaid over the next 5 years. As the CMS 
Chief Actuary notes in his 2011 Medicaid Actuarial Report, 
State spending on the program will surpass $2 trillion over the 
same time period.
    Medicaid is also the largest Federal health care program in 
terms of lives covered. In fiscal year 2010, 67.7 million 
people were enrolled in the program at some point during the 
year and at least 26 million more people will be added to the 
program because of the program's expansion in PPACA. While 
Medicaid was originally designed as a safety net, serving just 
4 million people in 1966, by 2020 there could be more than 90 
million Americans. That means at least 1 in 4 Americans will be 
dependent on the government program Medicaid. These statistics 
are alarming and unsustainable given Washington's record debt 
and deficit levels and the increasing burden on States to 
sustain their Medicaid programs.
    Rather than ensuring the Medicaid program remains fiscally 
sustainable, PPACA enacted the largest expansion of the 
entitlement program since its inception in 1965. In fact, half 
of the individuals gaining health care coverage under the new 
health law will obtain it through the government's Medicaid 
program.
    While the dramatic expansion of the Medicaid program in 
PPACA will contribute to a sharp increase in Federal Medicaid 
expenditures over the next 10 years, program integrity remains 
a serious concern. The Committee is committed to ensuring 
greater transparency and accountability in how Federal funds 
are spent in all 50 States and the U.S territories.
    Program integrity can be improved significantly by ensuring 
eligibility review is done properly and consistently. According 
to CMS, Medicaid made nearly $22 billion in improper payments 
in 2011, of which, more than $15 billion was associated with 
eligibility review errors. Policies such as the implementation 
of the burdensome Maintenance of Effort (MOE) on States 
prohibit any changes to eligibility, methods, and procedures 
until after 2014 for adults in Medicaid. For children under 19 
years of age in Medicaid or the Children's Health Insurance 
Program (CHIP), eligibility, methods, and procedures for 
determining eligibility cannot be changed until September 2019.
    Such policies limit a State's ability to ensure greater 
program integrity by limiting new eligibility review standards 
that would ensure the program is used for the truly eligible 
and most vulnerable. In contrast, the creation of the 
Performance Bonus Payments in the Children's Health Insurance 
Program Reauthorization Act of 2009 (CHIPRA), which was signed 
into law by President Obama, rewards States for loosening their 
Medicaid eligibility review procedures. Such financial 
incentives only further weaken the program's integrity and 
exacerbate the existing improper payment rates.
A Broken Medical Liability System
    The Nation's medical liability system imperils patient 
access and imposes tremendous costs on our Nation. It has 
forced doctors out of practicing in certain specialties; it has 
caused trauma centers to close; it has forced pregnant women to 
drive hours to find an obstetrician. This badly broken system 
also imposes tremendous financial burdens: Americans spend over 
$200 billion every year in unnecessary ``health care'' 
costs;\1\ the CBO has reported to the Committee that 
comprehensive medical liability reform will save American 
taxpayers $63.9 billion over 10 years.\2\
---------------------------------------------------------------------------
    \1\PwC's ``The Price of Excess'' (2010): http://www.pwc.com/us/en/
healthcare/publications/the-price-of-excess.jhtml
    \2\CBO Preliminary Estimates of E&C; Reconciliation Proposals.
---------------------------------------------------------------------------
    In sharp contrast, States like California and Texas, as 
well as others, have already enacted comprehensive medical 
liability reforms. As discussed below, enacting these reforms 
nationally will decrease the costs of defensive medicine, 
reduce medical liability fears that inhibit quality of care 
improvement, end years of Washington inaction on this recurring 
crisis, and, as shown by the States, increase patient access to 
quality care while reducing costs, including liability 
premiums.
    President Obama has repeatedly cited the importance of 
medical tort reform, but nothing meaningful in this area was 
included in PPACA.
The Costs of Defensive Medicine
    Doctors are sued at an alarming rate (by the age of 55, 61 
percent of doctors have been sued) and forced to practice 
defensive medicine. In fact, a 2005 survey published in the 
Journal of the American Medical Association (AMA) revealed that 
93 percent of doctors said they have practiced defensive 
medicine and 92 percent said they made referrals to specialists 
and/or ordered tests or procedures in part to insulate 
themselves from medical liability.\3\
---------------------------------------------------------------------------
    \3\AMA's ``Medical Liability: By late career, 61% of doctors have 
been sued'': http://www.ama-assn.org/amednews/2010/08/ 16/prl20816.htm.
---------------------------------------------------------------------------
    Part of defensive medicine is called assurance behavior 
where a monetary value is assigned. This occurs when a doctor 
orders a test or procedure where at least some of the 
motivation is to avoid being second-guessed in retrospect and 
possibly named in a medical liability suit. This is not fraud. 
Medicine is not an exact science. No doctor can tell whether 
the patient in front of them is the one who may have the rare 
clinical condition that may have been detected with an 
additional test. Faced with the possibility of a professionally 
devastating malpractice suit, many physicians will order the 
extra test. Sixty percent of malpractice cases are dropped or 
dismissed and never go to court, but it costs a doctor an 
average of $18,000 to defend against a lawsuit. Doctors are 
found not negligent in 90 percent of the cases that do go to 
trial, but each of these cases costs an average of $100,000 to 
defend.\4\
---------------------------------------------------------------------------
    \4\See note 12.
---------------------------------------------------------------------------
    Defensive medicine is not done to increase income. If an 
internist orders a CAT scan, the radiologist gets paid, not the 
internist.
    Medical malpractice premiums written in 2009 totaled 
approximately $10.8 billion.\5\ Indirect costs, particularly 
increased use of tests and procedures by providers to protect 
against future lawsuits (``defensive medicine''), have been 
estimated to be much higher than direct premiums.
---------------------------------------------------------------------------
    \5\NAIC, ``Countrywide Summary of Medical Malpractice Insurance, 
Calendar Years 1991-2009,'' provided to CRS on December 16, 2010.
---------------------------------------------------------------------------
    The Pacific Institute puts the cost of defensive medicine 
at some $200 billion and estimates that these additional 
liability-based medical care costs add at least 3.4 million 
Americans to the rolls of the uninsured.\6\ Nearly half of all 
medical malpractice claims do not involve injury or medical 
error. Likewise, the Manhattan Institute concluded that about 
ten cents of every dollar paid for health care services goes to 
cover malpractice premiums, defensive medicine, and other costs 
associated with excessive litigation.
---------------------------------------------------------------------------
    \6\Lawrence 1. McQuillan, Hovannes Ahramyan and Anthony P. Archie, 
Jackpot Justice: The True Cost of America's Tort System, Pacific 
Research Institute (Mar. 2007).
---------------------------------------------------------------------------
Medical Liability Fears Inhibit Quality of Care Improvements
    Fear of medical liability makes it more difficult to 
improve systems by making doctors reluctant to discuss and 
study errors and ``near misses'' or participate in morbidity 
and mortality conferences if the findings are ``discoverable'' 
in a malpractice claim.
    Another common myth is that a small group of bad doctors 
are responsible for most malpractice cases, and the current 
medical tort system is needed or they will be free to 
repeatedly harm patients through their negligence. According to 
a 2007 analysis of National Practitioner Data Bank (NPDB) files 
by Public Citizen ``[t]he vast majority of doctors--82 
percent--have never had a medical malpractice payment since the 
NPDB was created in 1990. Just 5.9 percent of doctors were 
responsible for 57.8 percent of all malpractice payments since 
1991, according to data from September 1990 through 2005. Just 
2.3 percent of doctors, having three or more malpractice 
payments, were responsible for 32.8 percent of all payments. 
Only 1.1 percent of doctors, having four or more malpractice 
payments, were responsible for 20.2 percent of all 
payments.''\7\
---------------------------------------------------------------------------
    \7\Public Citizen, Congress Watch, The Great Medical Malpractice 
Hoax: NPDB Data Continue to Show Medical Liability System Produces 
Rational Outcomes, (January 2007): http://www.citizen.org/publications/
publicationredirect.cfm?ID=7497.
---------------------------------------------------------------------------
    However, Public Citizen's own report highlights the 
problem. According to the AMA Physician Practice Information 
Survey, 75.4 percent of cardiothoracic surgeons, 68.3 percent 
of general surgeons, 79.1 percent of neurosurgeons, 70.3 
percent of orthopedic surgeons, and 69.6 percent of OB/GYNs 
have been sued.\8\ The numbers do not add up. Either there are 
a lot of frivolous lawsuits or almost all doctors are really 
bad doctors. The truth is that most claims are meritless and do 
not result in a payment, yet most doctors have to defend 
themselves from these unnecessary claims at a substantial cost 
to themselves and the Nation's health care system.
---------------------------------------------------------------------------
    \8\AMA 2007-2008 Physician Practice Information survey.
---------------------------------------------------------------------------
    The medical liability tort system does not improve quality. 
A number of studies have failed to show that the current system 
of medical liability deters medical errors or promotes patient 
safety.\9\ This has been most extensively studied in the 
specialty of obstetrics where the fear of medical liability has 
not been shown to result in fewer complications or cesarean 
sections.\10\ There is evidence, however, that fears of medical 
liability deter doctors from treating high risk patients, 
performing high risk procedures, entering high risk 
specialties, and practicing in states without liability reform.
---------------------------------------------------------------------------
    \9\Mello MM, Brennan TA. Deterrence of medical errors: theory and 
evidence for malpractice reform. Texas Law Review. 2002; 80:1595-638.
    \10\A. Russell Localio, JD, MPH, MS; Ann G. Lawthers, ScD; Joan M. 
Bengtson, MD; Liesi E. Hebert, ScD; Susan L. Weaver; Troyen A. Brennan, 
MD, JD; J. Richard Landis, PhD, Relationship Between Malpractice Claims 
and Cesarean Delivery, JAMA. 1993;269(3):366-373.
---------------------------------------------------------------------------
    This proposal will make it easier to promote efforts at 
improving patient safety and quality of care by allowing 
doctors and hospitals to examine the causes of medical errors 
and make systemic improvements without the fear of litigation 
that exists in States without liability reform.

A Recurring Crisis, Yet Washington Has Failed to Act

    Medical malpractice reform has surfaced as a national issue 
repeatedly over recent decades during periods of ``crisis.'' A 
2004 survey found that three out of four emergency rooms had to 
divert ambulances because of a shortage of specialists due to 
medical liability issues.\11\ The evidence from States like 
California that medical liability reform works has been 
available for over three decades. Unnecessary costs and 
defensive medicine have a negative effect on the Federal health 
care programs of Medicare and Medicaid.\12\
---------------------------------------------------------------------------
    \11\Hospital Emergency Department Administration Survey, ``Federal 
Medical Liability Reform,'' 2004, the Schumacher Group, Alliance of 
Specialty Medicine, July 2005.
    \12\Under Medicare, the federal government pays a percentage of 
doctors' liability premiums through the practice expense component of 
the physician fee schedule. The federal government also incurs costs 
because of defensive medicine.
---------------------------------------------------------------------------
    President Obama has repeatedly expressed his support for 
meaningful medical liability reform. In a 2009 speech before 
the AMA, the President acknowledged that defensive medicine 
leads to more tests and needless costs because doctors must 
protect themselves from frivolous lawsuits.\13\ Again, during a 
speech to a Joint Session of Congress in September 2009, 
President Obama said ``I don't believe malpractice reform is a 
silver bullet, but I've talked to enough doctors to know that 
defensive medicine may be contributing to unnecessary 
costs.''\14\ In his 2011 State of the Union address, President 
Obama again included medical liability reform as part of his 
agenda.\15\
---------------------------------------------------------------------------
    \13\The text of the June 2009 speech can be found here: http://
www.whitehouse.gov/the-press-office/remarks-president-annual-
conference-american-medical-association.
    \14\The text of this address can be found here: http://
www.whitehouse.gov/the-press-office/remarks-president-a-joint-session-
congress-health-care.
    \15\In his January 25, 2011, State of the Union address, President 
Obama specifically called for ``medical malpractice reform to rein in 
frivolous lawsuits.'' On January 27, Republicans on the Committee wrote 
directly to the President seeking his leadership in crafting such 
legislation. There has been no response from the Administration.
---------------------------------------------------------------------------
    A common question from the American people is why there 
were no meaningful medical liability reform provisions in the 
health reform law. An October 2009 survey conducted by the 
Health Coalition on Liability and Access found that 69 percent 
of Americans wanted medical liability reform included in health 
care reform legislation.\16\ One of the most truthful answers 
came from Governor Howard Dean when he commented as follows on 
the House bill (H.R. 3200):
---------------------------------------------------------------------------
    \16\112th Congress Committee on the Judiciary Report on the ``Help 
Efficient, Accessible, Low-Cost, Timely Healthcare Act of 2011.''

          Here's why tort reform is not in the bill. When you 
        go to pass a really enormous bill like that, the more 
        stuff you put in it, the more enemies you make, right? 
        And the reason that tort reform is not in the bill is 
        because the people who wrote it did not want to take on 
        the trial lawyers in addition to everyone else they 
        were taking on. And that is the plain and simple 
        truth.\17\
---------------------------------------------------------------------------
    \17\http://washingtonexaminer.com/blogs/beltway-confidential/2009/
08/dean-says-obamacare-authors-dont-want-challenge-trial-lawyers.

    As Shown by the States, Comprehensive Reform Will Increase 
---------------------------------------------------------------------------
Patient Access to Quality Care While Reducing Costs

    States that have adopted caps have seen tremendous 
benefits. Patients who are harmed are still compensated 100 
percent for economic losses (anything to which a receipt can be 
attached), suffered as the result of a health care injury. 
California's landmark legislation, the Medical Injury 
Compensation Reform Act of 1975 (MICRA) signed into law by 
Governor Jerry Brown (D), helped to stabilize the California 
medical liability insurance market. From 1976 through 2009, 
California's medical liability insurance premiums increased by 
261 percent compared to a total increase of 945 percent for the 
other 49 States.\18\
---------------------------------------------------------------------------
    \18\The American Medical Association's written testimony for 
January 20, 2011, House Judiciary Committee hearing: http://www.ama-
assn.org/ama1/pub/upload/mm/399/ama-statement-medical-liability-reform-
2011.pdf.
---------------------------------------------------------------------------
    Additionally, Texas adopted comprehensive medical 
malpractice reform, including caps on non-economic damages, in 
2003, and these reforms have yielded remarkable outcomes, 
including an increase in new physicians, additional 
obstetricians, and reduced medical liability premiums. From 
2003 through 2009, the Texas Medical Board saw an increase of 
roughly 60 percent in their new physician licensure 
applications.\19\ While other states were losing obstetricians, 
Texas actually gained obstetricians. The number of 
obstetricians in Texas increased by 218 between 2002 and 2009 
to a total of 2,444.\20\ Finally, all major physician liability 
carriers in Texas have reduced their rates resulting in nearly 
all Texas physicians having their premiums lowered by at least 
30 percent and some by well over 40 percent since 2004.\21\
---------------------------------------------------------------------------
    \19\Texas Medical Association's ``Proposition 12 Produces Healthy 
Benefits'': http://www.texmed.org/ Template.aspx?id=5238.
    \20\The chart detailing obstetricians in Texas can be found here: 
http://www.tapa.info/Downloads/Improving_Access/2010_Charts/
06_TAPA_Obstetricians.pdf.
    \21\Texas Medical Association ``Professional Liability Insurance 
Reform'': http://www.texmed.org/Template. aspx?id=780.
---------------------------------------------------------------------------
    Caps on non-economic damages do not deny injured patients 
the ability to have their cases heard. States that have enacted 
caps have not seen a significant reduction in the number of 
claims, only in the number of unpredictable and unreasonably 
large awards for pain and suffering.\22\ States that have not 
enacted reform continue to allow a few patients and their 
attorneys unlimited awards while everyone else is burdened with 
limited health care and rising costs.
---------------------------------------------------------------------------
    \22\In July 2007, a Los Angeles County Court awarded a plaintiff 
over $96 million in damages while abiding by MICRA's $250,000 cap on 
non-economic damages. www.micra.org.
---------------------------------------------------------------------------
    Twenty-eight States have enacted meaningful medical 
liability re-form\23\ that includes, among other provisions, a 
cap on non-economic damages, while twenty-two States continue 
to operate within the national health care system without 
meaningful liability reform. In States with caps on non-
economic damages, liability premiums are 17 percent lower than 
they are in States without such caps.\24\
---------------------------------------------------------------------------
    \23\AANS/CNS PowerPoint Presentation ``The State of Medical 
Liability Reform: Successes and Challenges for the Future'', February 
19, 2010.
    \24\``The Medical Malpractice Crisis': Trends and the Impact of 
State Tort Reforms,'' Kenneth E. Thorpe, (January 21, 2004) at 20-30.
---------------------------------------------------------------------------
    In those States that have enacted meaningful reform, 
malpractice premiums are affordable, defensive medicine costs 
are lower and patients have greater access to care when and 
where they need it. For example, two thorough studies that used 
national data on Medicare populations concluded that States 
with medical liability reforms saw an average reduction of 4.3 
percent in hospital costs for patients in managed care 
programs.\25\ This is not the case in States that have refused 
to enact meaningful reform.
---------------------------------------------------------------------------
    \25\Daniel P. Kessler and Mark B. McClellan, ``Medical Liability, 
Managed Care, and Defensive Medicine,'' National Bureau of Economic 
Research (NBER) Working Paper 7537 (February 2000) at 16.
---------------------------------------------------------------------------
    In States without liability reform, the system does not 
serve anyone except trial lawyers. Injured patients are not 
compensated in a timely or equitable way. They are forced to 
wade through several years of litigation and receive, on 
average, only 46 cents of every dollar awarded while the 
remaining 54 cents goes to their lawyers and other 
administrative fees.\26\
---------------------------------------------------------------------------
    \26\NEJM ``Claims, Errors, and Compensation Payments in Medical 
Malpractice Litigation.'': http://www.nejm.org/doi/full/10.1056/ 
NEJMsa054479.
---------------------------------------------------------------------------
    State reforms show that comprehensive medical liability 
reform, that includes caps on non-economic damage awards, will 
improve patients' access to quality care while reducing the 
overall cost of health care in America.

                                Hearings


ACA Funding Provisions

    The Subcommittee on Health held hearings on Prevention and 
Public Health Funds during the first session of the 112th 
Congress. On March 9, 2011, the Subcommittee held a hearing 
entitled ``Setting fiscal Priorities in Health Care Funding.'' 
The Subcommittee received testimony from the Honorable Earnest 
Istook, Distinguished Fellow, the Heritage Foundation; Dr. John 
C. Goodman, President and CEO, National Center for Policy 
Analysis; and the Honorable Joseph F. Vitale, New Jersey State 
Senate.

Medicaid

    The full Committee and the Subcommittee on Health held 
hearings on Medicaid reform during the first session of the 
112th Congress. On Tuesday, March 1, 2011, the full Committee 
held a hearing entitled ``The Consequences of Obamacare: Impact 
on Medicaid and State Health Care Reform.'' The Committee 
received testimony from Utah Governor Gary R. Hubert, 
Mississippi Governor Haley Barbour, and Massachusetts Governor 
Deval Patrick.

Medical Liability

    The Subcommittee on Health held hearings on Medical 
Liability during the first session of the 112th Congress. On 
April 6, 2011, the Subcommittee held a hearing entitled ``The 
Cost of the Medical Liability System Proposals for Reform, 
including H.R. 5, the Help Efficient, Accessible, Low-cost, 
Timely Healthcare (HEALTH) Act of 2011.'' The Subcommittee 
received testimony from Dr. Lisa M. Hollier, MPH, American 
College of Obstetricians and Gynecologists Fellow, Professor 
and Director of the Lyndon B Johnson Residency Program at the 
University of Texas Medical School at Houston; Dr. Allen B. 
Kachalia, Esq., Medical Director of Quality and Safety, Brigham 
and Women's Hospital, Harvard Medical School; and Dr. Troy M. 
Tippetts, Past President, American Association of Neurological 
Surgeons and Past President, Florida Medical Association.

                        Committee Consideration

    On April 24 and 25, 2012, the Committee met in open markup 
session to consider the Committee Prints entitled ``Title I--
Repeal of Certain ACA Funding Provisions,'' ``Title II--
Medicaid,'' and ``Title III--Liability Reform.'' A motion by 
Mr. Upton to transmit the Committee Prints as the 
recommendations of the Committee, and all appropriate 
accompanying material, including additional, supplemental, or 
dissenting views, to the House Committee on the Budget, in 
order to comply with the reconciliation directive included in 
section 201 of H. Con. Res. 112, establishing the budget for 
the United States Government for fiscal year 2013 and setting 
forth appropriate budgetary levels for fiscal years 2014 
through 2022, and consistent with section 310 of the 
Congressional Budget and Impoundment Control Act of 1974, was 
agreed to by a voice vote.

                            Committee Votes

    Clause 3(b) of Rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following are the recorded votes taken on amendments offered to 
the Committee Prints.



                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the oversight findings and 
recommendations of the Committee are reflected in the 
descriptive portions of this report, including the finding that 
reigning in mandatory spending is necessary to avoid a debt 
crisis.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the performance goals and 
objectives of the Committee are reflected in the descriptive 
portions of this report, including the goal of avoiding a debt 
crisis by reigning in mandatory spending.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that the 
Committee Prints would result in no new or increased budget 
authority, entitlement authority, or tax expenditures or 
revenues.

                                Earmark

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI, 
the Committee finds that the Committee Prints contain no 
earmarks, limited tax benefits, or limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 27, 2012.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the Reconciliation 
Recommendations of the House Committee on Energy and Commerce.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kirstin 
Nelson.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Reconciliation Recommendations of the House Committee on Energy and 
        Commerce

    Summary: H. Con. Res. 112, the Concurrent Budget Resolution 
for fiscal year 2013, as passed by the House of Representatives 
on March 29, 2012, instructed several committees of the House 
to recommend legislative changes that would reduce deficits 
over the 2012-2022 period. As part of this process, the House 
Committee on Energy and Commerce approved legislation on April 
25, 2012, with a number of provisions that would reduce 
deficits.
    In total, CBO and the staff of the Joint Committee on 
Taxation (JCT) estimate that enacting the legislation would 
reduce deficits by about $2.9 billion over the 2012-2013 
period, by $45.9 billion between 2012 and 2017, and by $113.4 
billion over the 2012-2022 period, assuming enactment on or 
near October 1, 2012. These figures represent the net effect of 
changes in direct spending and revenues as a result of the 
legislation. About $1.4 billion of the reduction for 2012 
through 2022 would be off-budget, from net increases in Social 
Security tax receipts.
    In addition, the Chairman of the House Committee on the 
Budget has directed CBO to prepare estimates assuming a July 1, 
2012, enactment date for this year's reconciliation proposals. 
If the legislation were enacted by that earlier date, some of 
the provisions would result in greater reductions in direct 
spending than those estimated assuming enactment on or near 
October 1, 2012. Under the alternative assumption of a July 1 
enactment date, CBO and JCT estimate that the legislation would 
reduce deficits by $3.9 billion over the 2012-2013 period, by 
$48.0 billion between 2012 and 2017, and by $115.5 billion over 
the 2012-2022 period.
    The Committee's recommendations would make the following 
changes:
     Title I would eliminate funding for certain 
provisions of the Affordable Care Act (ACA), by repealing the 
authority for the Secretary of Health and Human Services (HHS) 
to provide grants to states for establishing health insurance 
exchanges, repealing the Prevention and Public Health Fund, and 
rescinding funding for loans for the Consumer Operated and 
Oriented Plan (CO-OP) program.
     Title II would make changes to Medicaid and the 
Children's Health Insurance Program (CHIP) by limiting states' 
ability to tax health care providers, reducing Medicaid 
payments to states for hospitals that serve a disproportionate 
share of poor and uninsured patients, repealing certain 
requirements that states maintain Medicaid and CHIP eligibility 
rules and procedures, limiting Medicaid payments to U.S. 
territories, and repealing performance bonuses under CHIP.
     Title III would impose limits on medical 
malpractice litigation in state and federal courts by capping 
awards and attorney fees, modifying the statute of limitations 
and the ``collateral source'' rule, and eliminating joint and 
several liability.
    The legislation contains an intergovernmental mandate as 
defined in the Unfunded Mandates Reform Act (UMRA) because it 
would preempt state laws that provide health care providers and 
organizations less protection from liability, loss, or damages. 
CBO estimates the cost of complying with the mandate would be 
small and would fall well below the threshold established in 
UMRA for intergovernmental mandates ($73 million in 2012, 
adjusted annually for inflation).
    The legislation contains several mandates on the private 
sector, including caps on damages and on attorney fees, the 
statute of limitations, and the fair share rule. The cost of 
those mandates would exceed the threshold established in UMRA 
for private-sector mandates ($146 million in 2012, adjusted 
annually for inflation) in four of the first five years in 
which the mandates were effective.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of the legislation is shown in the following 
tables. The spending effects of this legislation fall mostly 
within budget functions 550 (health) and 570 (Medicare).
    For purposes of this estimate, CBO assumes that the 
legislation will be enacted on or near October 1, 2012, as 
shown in Table 1. As directed by the Chairman of the House 
Budget Committee, CBO has also prepared a set of estimates 
based on the assumption that the legislation is enacted by July 
1, 2012. Those alternative estimates are presented in Table 2.

   TABLE 1. EFFECTS ON DIRECT SPENDING AND REVENUES FOR RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON ENERGY AND COMMERCE, AS APPROVED BY THE COMMITTEE ON APRIL 25, 2012, ASSUMING
                                                                                ENACTMENT AROUND OCTOBER 1, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       By fiscal year, in millions of dollars--
                                                     -------------------------------------------------------------------------------------------------------------------------------------------
                                                       2012     2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017   2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Title I--Repeal of Certain ACA Funding Provisions:
    Estimated Budget Authority......................      0     -4,000     -3,860     -5,500     -5,460     -2,280     -1,250     -1,250     -1,500     -1,500     -2,000    -21,100     -28,600
    Estimated Outlays...............................      0       -630     -3,840     -5,960     -5,730     -2,380     -1,090     -1,200     -1,320     -1,450     -1,670    -18,540     -25,270
Title II--Medicaid:
    Estimated Budget Authority......................      0     -9,990     -1,730        110     -1,900     -2,260     -2,050     -2,200     -1,330     -1,400     -5,710    -15,770     -28,460
    Estimated Outlays...............................      0     -2,140     -1,800     -3,190     -2,000     -1,690     -2,050     -2,090     -1,280     -1,400     -5,710    -10,820     -23,350
Title III--Liability Reform:
    Estimated Budget Authority......................      0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
    Estimated Outlays...............................      0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
Total Changes in Direct Spending:
    Estimated Budget Authority......................      0    -14,090     -6,470     -8,460    -12,600    -11,050    -10,280    -10,900    -10,830    -11,470    -16,870    -52,670    -113,020
    Estimated Outlays...............................      0     -2,870     -6,520    -12,220    -12,970    -10,580    -10,120    -10,740    -10,600    -11,420    -16,540    -45,160    -104,580

                                                                  CHANGES IN REVENUES ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Estimated Revenues\a\
    On-Budget.......................................      0        -10          0       -430        750      1,000      1,010      1,180      1,240      1,300      1,380      1,310       7,420
    Off-Budget\b\...................................      0          0       -190       -530       -100        210        330        390        400        420        440       -610       1,370
      Total Changes.................................      0        -10       -190       -960        650      1,210      1,340      1,570      1,640      1,720      1,820        700       8,790

                                                        INCREASE OR DECREASE (-) IN THE DEFICIT ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Net Effect on Deficits:
    On-Budget.......................................      0     -2,860     -6,520    -11,790    -13,720    -11,580    -11,130    -11,920    -11,840    -12,720    -17,920    -46,470    -112,000
    Off-Budget\b\...................................      0          0        190        530        100       -210       -330       -390       -400       -420       -440        610      -1,370
      Total Changes.................................      0     -2,860     -6,330    -11,260    -13,620    -11,790    -11,460    -12,310    -12,240    -13,140    -18,360    -45,860   -113,370
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CBO and the staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding; ACA = the Affordable Care Act.
\a\Negative numbers denote a reduction in revenues and positive numbers denote an increase in revenues.
\b\All off-budget effects would come from changes in revenues. (Payroll taxes for Social Security are classified as off-budget.)


  TABLE 2.--EFFECTS ON DIRECT SPENDING AND REVENUES FROM RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON ENERGY AND COMMERCE, AS APPROVED BY THE COMMITTEE ON APRIL 25, 2012, ASSUMING
                                                   ENACTMENT BY JULY 1, 2012, AS DIRECTED BY THE CHAIRMAN OF THE HOUSE COMMITTEE ON THE BUDGET
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     By fiscal year, in millions of dollars--
                                                 -----------------------------------------------------------------------------------------------------------------------------------------------
                                                     2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2022    2012-2017   2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT BY JULY 1, 2012

Title I--Repeal of Certain ACA funding
 provisions:
    Estimated Budget Authority..................     -3,960     -1,980     -3,860     -5,500     -5,460     -2,280     -1,250     -1,250     -1,500     -1,500     -2,000    -23,040     -30,540
    Estimated Outlays...........................       -230     -1,230     -4,480     -6,260     -5,830     -2,440     -1,090     -1,200     -1,320     -1,450     -1,670    -20,470     -27,200
Title II--Medicaid:
    Estimated Budget Authority..................     -8,480     -1,690     -1,730        110     -1,900     -2,260     -2,050     -2,200     -1,330     -1,400     -5,710    -15,950     -28,640
    Estimated Outlays...........................       -180     -2,140     -1,800     -3,190     -2,000     -1,690     -2,050     -2,090     -1,280     -1,400     -5,710    -11,000     -23,530
Title III--Liability Reform:
    Estimated Budget Authority..................          0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
    Estimated Outlays...........................          0       -100       -880     -3,070     -5,240     -6,510     -6,980     -7,450     -8,000     -8,570     -9,160    -15,800     -55,960
Total Changes in Direct Spending:
    Estimated Budget Authority..................    -12,440     -3,770     -6,470     -8,460    -12,600    -11,050    -10,280    -10,900    -10,830    -11,470    -16,870    -54,790    -115,140
    Estimated Outlays...........................       -410     -3,470     -7,160    -12,520    -13,070    -10,640    -10,120    -10,740    -10,600    -11,420    -16,540    -47,270    -106,690

                                                                     CHANGES IN REVENUES ASSUMING ENACTMENT BY JULY 1, 2012

Estimated Revenues\a\
    On-Budget...................................          0        -10          0       -430        750      1,000      1,010      1,180      1,240      1,300      1,380      1,310       7,420
    Off-Budget\b\...............................          0          0       -190       -530       -100        210        330        390        400        420        440       -610       1,370
      Total Changes.............................          0        -10       -190       -960        650      1,210      1,340      1,570      1,640      1,720      1,820        700       8,790

                                                           INCREASE OR DECREASE (-) IN THE DEFICIT ASSUMING ENACTMENT BY JULY 1, 2012

Net Effect on Deficits:
    On-Budget...................................       -410     -3,460     -7,160    -12,090    -13,820    -11,640    -11,130    -11,920    -11,840    -12,720    -17,920    -48,580    -114,110
    Off-Budget\b\...............................          0          0        190        530        100       -210       -330       -390       -400       -420       -440        610      -1,370
      Total Changes.............................       -410     -3,460     -6,970    -11,560    -13,720    -11,850    -11,460    -12,310    -12,240    -13,140    -18,360    -47,970   -115,480
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: CBO and the staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding; ACA = the Affordable Care Act.
\a\Negative numbers denote a reduction in revenues and positive numbers denote an increase in revenues.
\b\All off-budget effects would come from changes in revenues. (Payroll taxes for Social Security are classified as off-budget.)

    Basis of estimate: In total, CBO and JCT estimate that 
enacting the Energy and Commerce Committee's recommendations 
would reduce direct spending by $104.6 billion, increase 
revenues by $8.8 billion, and reduce deficits by about $113.4 
billion over the 2012-2022 period, assuming enactment on or 
near October 1, 2012 (see Table 1). Assuming enactment by July 
1, 2012, the committee's recommendations are estimated to 
reduce direct spending by $106.7 billion, increase revenues by 
$8.8 billion, and reduce deficits by about $115.5 billion over 
the 2012-2022 period (see Table 2).

Title I--Repeal of Certain ACA Funding Provisions

    Title I of the legislation would repeal several provisions 
of the Affordable Care Act, including grant authority for state 
exchanges, the Prevention and Public Health Fund, and funding 
for loans for the CO-OP program. CBO estimates that enacting 
the provisions in title I would reduce direct spending by $25.3 
billion over the 2012-2022 period, assuming enactment on or 
near October 1, 2012; and by $27.2 billion over the same 
period, assuming enactment by July 1, 2012. In addition, 
enacting title I would reduce revenues by approximately $0.9 
billion over the 2012--2022 period for both October 1, 2012, 
and July 1, 2012, enactment dates.
    State Exchange Grants. The legislation includes a provision 
to eliminate the authority of the Secretary of HHS to provide 
grants to states for setting up health insurance exchanges. 
Section 1311 of the ACA provided for such grants in the amounts 
necessary for planning and establishing health insurance 
exchanges until January 1, 2015. Under current law, CBO 
estimates that $2.7 billion in grants will be provided to 
states over the 2012-2022 period. CBO expects that some of 
those funds will be obligated by the time this legislation is 
enacted and will be disbursed over time even if the legislation 
is enacted. Therefore, eliminating the authority to provide 
grants after the enactment date would generate a reduction in 
the disbursement of grants of $1.4 billion over the 2012-2022 
period, CBO estimates. In addition, the repeal would lead to 
some delay in the establishment of insurance exchanges, 
resulting in changes in insurance coverage and additional 
changes in federal spending primarily for subsidies provided 
through health insurance exchanges. After taking into account 
such changes in coverage, CBO and JCT estimate that enacting 
this provision would reduce direct spending by $14.1 billion 
over the 2012-2022 period and would reduce net revenues by $0.9 
billion over the same period.
    Prevention and Public Health Fund. The ACA established the 
Prevention and Public Health Fund and provided authority for 
federal agencies to award grants from the fund to public and 
private entities for prevention, wellness, and public health 
activities. Federal agencies can award annual grants that total 
$1.0 billion in 2012 rising to $2.0 billion in 2022 and beyond. 
Title I would repeal the Prevention and Public Health Fund and 
rescind any unobligated balances. CBO estimates that enacting 
this provision would reduce direct spending by $10.9 billion 
over the 2012-2022 period.
    Consumer Operated and Oriented Plan Program. Title I also 
would rescind unobligated balances of the CO-OP program. The 
CO-OP program was established by the ACA to provide loans to 
new nonprofit health insurance issuers so that they may offer 
health insurance plans in the individual and small group 
markets. CBO estimates that enacting this provision would 
reduce direct spending by $0.3 billion over the 2012-2022 
period.

Title II--Medicaid and CHIP

    Title II would make several changes to Medicaid and CHIP. 
It would limit states' ability to tax health care providers, 
reduce payments to hospitals that serve a disproportionate 
share of poor and uninsured patients (known as DSH payments), 
repeal Medicaid and CHIP maintenance of effort requirements, 
limit Medicaid payments to the U.S. territories, and repeal the 
authority for HHS to award CHIP performance bonuses.
    CBO estimates that enacting title II would reduce direct 
spending by $23.4 billion over the 2012-2022 period, assuming 
enactment on or near October 1, 2012; and by $23.5 billion over 
the same period, assuming enactment by July 1, 2012. In 
addition, enacting title II would reduce revenues by $0.8 
billion over the 2012-2022 period for both the October 1 and 
July 1 enactment assumptions.
    Revise Provider Tax Threshold. Under current law, states 
may not tax health care providers and return the tax revenues 
to those same providers through higher Medicaid payment rates 
or through other offsets and guarantees (known as a ``hold 
harmless'' arrangement). An exception to this provision is that 
the federal government will not deem a hold harmless 
arrangement to exist if the provider taxes collected from given 
providers are less than 6 percent of the providers' revenues. 
The legislation would lower the allowable percentage threshold 
of provider revenues to 5.5 percent starting in 2013. CBO 
estimates that enacting this provision would reduce direct 
spending by $11.3 billion over the 2012-2022 period.
    Reduce DSH Payments. Under current law, Medicaid provides 
for payments to hospitals that serve a disproportionate share 
of low-income and uninsured individuals. The ACA reduced those 
payments beginning in 2014 and continuing through 2021. 
Payments in 2022 were unaffected. This provision would reduce 
DSH payments in 2022 from $12.1 billion to $7.9 billion, 
bringing those amounts in line with 2021 payments. CBO 
estimates that enacting this provision would reduce direct 
spending by $4.2 billion in 2022.
    Repeal Medicaid and CHIP Maintenance of Effort (MOE) 
Requirements. As a condition of receiving federal Medicaid and 
CHIP payments, states must maintain the eligibility standards, 
methodologies, and procedures that were in place prior to 
enactment of the ACA with respect to children and adults in 
Medicaid and CHIP. The requirements for adults remain in effect 
until state health insurance exchanges are operational while 
the requirements for children remain in effect until 2019. The 
legislation would repeal the MOE requirements for adults and 
children in Medicaid and CHIP. CBO assumes that individuals 
losing Medicaid or CHIP coverage as a result of this provision 
would take up employment-based health insurance, exchange 
coverage, or become uninsured. Those changes in enrollment in 
Medicaid, CHIP, exchanges, and employer-based health insurance 
together would reduce direct spending by approximately $1.4 
billion and reduce revenues by $0.8 billion over the 2012-2022 
period.
    Limit Medicaid Payments to Territories. The legislation 
would repeal provisions enacted under the ACA that increased 
Medicaid payments to the U.S. territories by raising their 
federal matching percentage and their capped allotments under 
the program. Under current law, CBO estimates that total 
Medicaid payments to the U.S. territories will be $12.4 billion 
over the 2012-2022 period with the Commonwealth of Puerto Rico 
expected to receive the majority of those payments. CBO 
estimates that eliminating the increased funding provided in 
the ACA would reduce direct spending by $6.1 billion over the 
2012-2022 period, assuming enactment around October 1, 2012. 
(Assuming enactment by July 1, 2012, savings from this 
provision would be $6.3 billion between 2012 and 2022.)
    Repeal CHIP Performance Bonuses. Under the CHIP statute, 
the Secretary of HHS awards bonus payments to states that meet 
two criteria. First, states must adopt any 5 of 8 specified 
program changes that generally facilitate enrollment in, and 
retention of, Medicaid and CHIP coverage for children. Second, 
states that have made such program changes must achieve 
specified enrollment targets for children's coverage in 
Medicaid. The legislation would repeal the bonus payment 
program as of the date of enactment. In addition, this 
legislation would rescind any unobligated balance remaining in 
the performance bonus fund. CBO estimates that enacting this 
legislation would reduce direct spending by $0.4 billion in 
2013 (with no effect in any other years).

Title III--Liability Reform

    The legislation would establish:
           A three-year statute of limitations for 
        medical malpractice claims, with certain exceptions, 
        from the date of discovery of an injury;
           A cap of $250,000 on awards for noneconomic 
        damages;
           A cap on awards for punitive damages that 
        would be the larger of $250,000 or twice the economic 
        damages, and restrictions on when punitive damages may 
        be awarded;
           Replacement of joint and several liability 
        with a fair-share rule, under which a defendant in a 
        lawsuit would be liable only for the percentage of the 
        final award that was equal to his or her share of 
        responsibility for the injury;
           Sliding-scale limits on the contingency fees 
        that lawyers can charge;
           A safe harbor from punitive damages for 
        products that meet applicable safety requirements 
        established by the Food and Drug Administration; and
           Permission to introduce evidence of income 
        from collateral sources (such as life insurance payouts 
        and health insurance) at trial.
    Over the 2012-2022 period, CBO and JCT estimate that 
enacting title III would reduce direct spending by about $56 
billion and increase federal revenues by about $10.5 billion. 
The combined effect of those changes in direct spending and 
revenues would reduce federal deficits by almost $66.5 billion 
over that period, with changes in off-budget revenues 
accounting for $2.6 billion of that reduction.
    Effects on National Spending for Health Care. CBO reviewed 
recent research on the effects of proposals to limit costs 
related to medical malpractice (``tort reform''), and estimates 
that enacting title III would reduce national health spending 
by about 0.5 percent.\1\ That figure comprises a direct 
reduction in spending for medical liability premiums and an 
additional indirect reduction from slightly less utilization of 
health care services. CBO's estimate takes into account the 
fact that, because many states have already implemented some 
elements of the legislation, a significant fraction of the 
potential cost savings has already been realized. Moreover, the 
estimate assumes that the spending reduction of about 0.5 
percent would be realized over a period of four years, as 
providers gradually change their practice patterns.
---------------------------------------------------------------------------
    \1\See Congressional Budget Office, letter to the Honorable Orrin 
G. Hatch regarding CBO's Analysis of the Effects of Proposals to Limit 
Costs Related to Medical Malpractice, (October 9, 2009). http://
www.cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort--Reform.pdf.
---------------------------------------------------------------------------
    Revenues. CBO estimates that private health spending would 
be reduced by about 0.5 percent. Much of private-sector health 
care is paid for through employment-based insurance that 
represents nontaxable compensation. In addition, beginning in 
2014, refundable tax credits will be available to certain 
individuals and families to subsidize health insurance 
purchased through new health insurance exchanges. (The portion 
of those tax credits that exceed taxpayers' liabilities are 
classified as outlays, while the portions that reduce 
taxpayers' liabilities are recorded as reductions in revenues.)
    Lower costs for health care arising from enactment of title 
III would lead to an increase in taxable compensation and a 
reduction in subsidies for health insurance purchased through 
an exchange. Those changes would increase federal tax revenues 
by an estimated $10.5 billion over the 2012-2022 period, 
according to estimates by JCT. Social Security payroll taxes, 
which are off-budget, account for $2.6 billion of that increase 
in revenues.
    Direct Spending. CBO estimates that enacting title III 
would reduce direct spending for Medicare, Medicaid, the CHIP, 
the Federal Employees Health Benefits program, the Defense 
Department's TRICARE for Life program, and subsidies for 
enrollees in health insurance exchanges. We estimate those 
reductions would total roughly $56 billion over the 2012-2022 
period.
    For programs other than Parts A and B of Medicare, the 
estimate assumes that federal spending for acute care services 
would be reduced by about 0.5 percent, in line with the 
estimated reductions in the private sector.
    CBO estimates that the reduction in federal spending for 
services covered under Parts A and B of Medicare would be 
larger--about 0.7 percent--than in the other programs or in 
national health spending in general. That estimate is based on 
empirical evidence showing that the impact of tort reform on 
the utilization of health care services is greater for Medicare 
than for the rest of the health care system.\2\
---------------------------------------------------------------------------
    \2\One possible explanation for that disparity is that the bulk of 
Medicare's spending is on a fee-for-service basis, whereas most private 
health care spending occurs through plans that manage care to some 
degree. Such plans limit the use of services that have marginal or no 
benefit to patients (some of which might otherwise be provided as 
``defensive'' medicine), thus leaving less potential for savings from 
the reduction of utilization in those plans than in fee-for-service 
systems.
---------------------------------------------------------------------------
    Estimated impact on state, local, and tribal governments--

Intergovernmental Mandates

    The bill contains an intergovernmental because it would 
preempt state laws that provide health care providers and 
organizations less protection from liability, loss, or damages. 
While the preemption would limit the application of state laws, 
it would impose no duty on states that would result in 
significant additional spending. Consequently, CBO estimates 
that any costs would fall well below the threshold established 
in UMRA for intergovernmental mandates ($73 million in 2012, 
adjusted annually for inflation).

Other Impacts

    The bill would have mixed effects on the budgets of state, 
local, and tribal governments aside from the mandate effects 
noted above. CBO estimates that those governments, as 
employers, would save money as a result of lower health 
insurance premiums precipitated by the bill's liability 
reforms. In addition, state, local, and tribal governments that 
collect income taxes would realize increased tax revenues as a 
result of increases in workers' taxable income. CBO estimates 
that the bill's changes also would lead to reduced state 
spending in Medicaid by $20 billion over the 2012-2022 period. 
The legislation also would limit the amount that states would 
be able to raise through taxes on Medicaid providers, reducing 
one of the means by which states finance their share of 
Medicaid spending.
    Other provisions in the bill would decrease the amount of 
resources that state, local, and tribal governments receive to 
establish health exchanges and to conduct prevention, wellness, 
and public health activities. In total, CBO estimates that the 
decrease in grant aid to states would exceed $12 billion over 
the 2012-2022 period. In addition, CBO estimates that enactment 
of the bill would reduce the amount of Medicaid payments that 
the U.S. territories receive by $6.1 billion over the same 
period.
    Estimated impact on the private sector: The legislation 
contains several mandates on the private sector, including caps 
on damages and on attorney fees, the statute of limitations, 
and the fair share rule.\3\ The cost of those mandates would 
exceed the threshold established in UMRA for private-sector 
mandates ($146 million in 2012, adjusted annually for 
inflation) in four of the first five years in which the 
mandates were effective.
---------------------------------------------------------------------------
    \3\Under the fair share rule, a defendant in a lawsuit would be 
liable only for the percentage of the final award that was equal to his 
or her share of responsibility for the injury.
---------------------------------------------------------------------------
    Previous CBO estimate: On April 26, 2012, CBO transmitted a 
cost estimate for the Help Efficient, Accessible, Low-cost, 
Timely Healthcare Act as approved by the House Committee on the 
Judiciary on April 25, 2012. That legislation is substantially 
similar to title III of this legislation. However, this 
legislation would permit the introduction of evidence of income 
from collateral sources at trial. The version of medical 
liability reform approved by the Committee on the Judiciary did 
not contain that provision. Differences in the CBO cost 
estimates for title III of this legislation and the legislation 
approved by the Committee on the Judiciary reflect that 
difference in the two versions of such liability reform.
    Estimate prepared by: Federal Costs: Sarah Anders, Tom 
Bradley, Jean Hearne, Stuart Hagen, Kirstin Nelson, Lisa 
Ramirez-Branum, and Rob Stewart; Impact on State, Local, and 
Tribal Governments: Lisa Ramirez-Branum; Impact on the Private 
Sector: Stuart Hagen, Jimmy Jin, and Michael Levine.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 7 of Rule XII of the Rules of the House 
of Representatives, the Committee finds that the Constitutional 
authority for this legislation is provided in Article I, 
section 8, clause 3.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


          SUBTITLE A--REPEAL OF CERTAIN ACA FUNDING PROVISIONS

Section 201. Repealing mandatory funding to States to establish 
        American Health Benefit Exchanges

    Section 201 repeals section 1311(a) of the Patient 
Protection and Affordable Care Act (PPACA), which provided the 
Secretary of Health and Human Services (HHS) the authority to 
provide grants to states for activities related to the 
establishment of American Health Benefit Exchanges. The 
subsection also provided to the Secretary an appropriation with 
no monetary cap. Section 101 also rescinds the unobligated 
balance of funds made available under section 1311(a).

Section 202. Repealing Prevention and Public Health Fund

    Section 202 repeals section 4002 of the PPACA, which 
created the Prevention and Public Health Fund. The fund 
provided the Secretary of HHS with a permanent annual 
appropriation to supplement the spending on any program within 
the Public Health Services Act (PHSA). Section 102 also 
rescinds the unobligated balance of funds made available under 
section 4002.

Section 203. Rescinding unobligated balances for CO-OP program

    Section 203 rescinds the unobligated balance of funds made 
available under section 1322(g) of the PPACA related to the 
Consumer Operated and Oriented Plan (CO-OP) program. The CO-OP 
program provides government subsidized loans to qualified 
nonprofit health insurance issuers.

                          SUBTITLE B--MEDICAID

Section 211. Revision of provider tax indirect guaranteed threshold

    Section 211 amends section 1903(w)(4)(C)(ii) of the Social 
Security Act to adjust the provider tax hold harmless threshold 
from 6 to 5.5 percent for portions of fiscal years beginning on 
or after October 1, 2012.

Section 212. Rebasing of State DSH allotments for fiscal year 2022

    Section 212 amends section 1923(f) of the Social Security 
Act to extend the reductions in disproportionate share hospital 
allotments as first proposed in the PPACA into fiscal year 
2022.

Section 213. Repeal of Medicaid and CHIP maintenance of effort 
        requirements under PPACA

    Section 213 amends section 1902 of the Social Security Act 
to repeal certain state Medicaid maintenance of effort 
requirements as enacted by PPACA. Section 204 also amends 
section 2105(d)(3) of the Social Security Act to repeal certain 
State CHIP maintenance of effort requirements as enacted by 
PPACA. Both amendments are effective upon date of enactment.

Section 214. Medicaid payment to territories

    Section 214 amends Section 1108(g) of the Social Security 
Act to repeal the $6.3 billion in additional payments to the 
United States Territories levels as provided in PPACA. Section 
205 also amends Section 1905(b) of the Social Security Act to 
reduce the Federal Medicaid Assistance Payment (FMAP) to the 
territories from 55 percent to 50 percent.

Section 215. Repealing bonus payments for enrollment under Medicaid and 
        CHIP

    Mr. Barton offered an amendment adding section 205 (Mr. 
Barton's amendment was adopted by a roll call vote of 30 yeas 
and 21 nays). Section 205 rescinds the performance bonus 
payments to states that were created in the Children's Health 
Insurance Reauthorization Act of 2009 (CHIPRA). These bonus 
payments are awarded to states that increase their Medicaid 
enrollment above a defined baseline from the prior year and 
loosen eligibility review procedures.

                      SUBTITLE C--LIABILITY REFORM

Section 221. Findings and purpose

    Section 221 states the findings and purpose of the bill.

Section 222. Encouraging speedy resolution of claims

    Section 222 states that a health care lawsuit shall be 
commenced three years after the date of manifestation of injury 
or one year after the claimant discovers, or through the use of 
reasonable diligence should have discovered, the injury, 
whichever occurs first. There is an exception for alleged 
injuries sustained by a minor before the age of 6, in which 
case a health care lawsuit may be commenced by or on behalf of 
the minor until the later of three years from the date of 
manifestation of injury, or the date on which the minor attains 
the age of 8.

Section 223. Compensating patient injury

    Section 223 sets forth guidelines regarding patients' 
ability to recover for certain types of damages. This section 
provides that in any health care lawsuit, nothing in this Act 
shall limit a claimant's recovery for the full amount of 
available economic damages, notwithstanding the limitation on 
non-economic damages. Under this section, there can be no more 
than $250,000 in non-economic damages regardless of the number 
of parties against whom the action is brought or the number of 
separate claims or actions brought with respect to the same 
injury. Future noneconomic damages shall not be discounted to 
present value. This section also provides that each party shall 
be liable for the amount of damages allocated to such party. 
This allocation shall be determined in direct proportion to 
such party's percentage of responsibility for the damages.

Section 224. Maximizing patient recovery

    Section 224 requires that courts supervise the arrangements 
for payment of damages to protect against conflicts of 
interests that may have the effect of reducing the actual 
amount of the award paid to the claimant.
    This section also establishes a sliding fee schedule for 
the payment of attorneys' contingency fees. Payments are 
allocated as follows: 40 percent of the first $50,000 recovered 
by the claimant; 33 1/3 percent of the next $50,000 recovered 
by the claimant; 25 percent of the next $500,000 recovered by 
the claimant; and 15 percent of any amount by which the 
recovery by the claimant(s) is in excess of $600,000.

Section 225. Additional health benefits

    Section 225 ensures that, in any health care lawsuit 
involving injury or wrongful death, a party may introduce 
evidence of collateral source benefits received, or reasonably 
likely to be received, from other parties. This section also 
restricts a provider of collateral source benefits from 
subrogating a claimant's recovery or obtaining any lien or 
credit against the claimant's damage award.

Section 226. Punitive damages

    Section 226 specifies guidelines for awarding punitive 
damages. Under this section, punitive damages may be awarded, 
if otherwise permitted by applicable State or Federal law, 
against any person in a health care lawsuit if it is proven by 
clear and convincing evidence that the person acted with 
malicious intent to injure the claimant, or that the person 
deliberately failed to avoid unnecessary injury that such 
person knew the claimant was substantially certain to suffer.
    This section also sets guidelines for determining the 
amount of punitive damages. The amount of punitive damages 
awarded may be as high as two times the amount of economic 
damages awarded or $250,000, whichever amount is greater.
    In addition, this section shields from punitive damages 
those companies that are fully compliant with all Federal Food, 
Drug, and Cosmetic Act (FFDCA) laws and regulations (in the 
case of biological medical products, full compliance with the 
FFDCA and section 351 of the PHSA.

Section 227. Authorization of payment of future damages to claimants in 
        health care lawsuits

    Section 227 requires the court, at the request of any 
party, to order that the award of future damages equaling or 
exceeding $50,000 be paid by periodic payments.

Section 228. Definitions

    Section 228 defines many of the terms included in the 
legislation.

Section 229. Effect on other laws

    Section 229 states that this legislation does not apply to 
civil actions brought for a vaccine-related injury or death, 
which is covered under provisions of the PHSA. It also states 
that nothing in the Act should affect any defense available to 
a defendant in a health care lawsuit or action under any other 
provision of Federal law.

Section 230. State flexibility and protection of State's rights

    Section 230 specifies many of the rules governing the 
relationship between the HEALTH Act and State and Federal laws. 
Specifically, this section provides that provisions governing 
health care lawsuits outlined in the legislation preempt State 
law to the extent that State law prevents the application of 
these provisions.
    The legislation also supersedes the Federal Tort Claims Act 
(FTCA) to the extent that the FTCA provides for a greater 
amount of damages or contingent fees, a longer period in which 
a health care lawsuit may be commenced, or a reduced 
application of periodic payments of future damages. The FTCA 
also is superseded if it prohibits the introduction of evidence 
regarding collateral source benefits, or mandates or permits 
subrogation or a lien on collateral source benefits.

Section 231. Applicability; effective date

    Section 231 states that the provisions of the legislation 
apply to any health care lawsuit brought in Federal or State 
court, or subject to alternative dispute resolutions system, 
that is initiated on or after the date of the enactment of the 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of the Act is 
governed by the applicable statute of limitations provision in 
effect at the time the injury occurred.

    Changes in Existing Law Made by Title II, as Transmitted by the 
                    Committee on Energy and Commerce

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
title II, as transmitted by the Committee on Energy and 
Commerce, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, existing law in which no change is proposed is shown in 
roman):

PATIENT PROTECTION AND AFFORDABLE CARE ACT

           *       *       *       *       *       *       *


TITLE I--QUALITY, AFFORDABLE HEALTH CARE FOR ALL AMERICANS

           *       *       *       *       *       *       *


Subtitle D--Available Coverage Choices for All Americans

           *       *       *       *       *       *       *


   PART 2--CONSUMER CHOICES AND INSURANCE COMPETITION THROUGH HEALTH 
                           BENEFIT EXCHANGES

SEC. 1311. AFFORDABLE CHOICES OF HEALTH BENEFIT PLANS.

  [(a) Assistance to States to establish American health 
benefit exchanges.--
          [(1) Planning and establishment grants.--There shall 
        be appropriated to the Secretary, out of any moneys in 
        the Treasury not otherwise appropriated, an amount 
        necessary to enable the Secretary to make awards, not 
        later than 1 year after the date of enactment of this 
        Act, to States in the amount specified in paragraph (2) 
        for the uses described in paragraph (3).
          [(2) Amount specified.--For each fiscal year, the 
        Secretary shall determine the total amount that the 
        Secretary will make available to each State for grants 
        under this subsection.
          [(3) Use of funds.--A State shall use amounts awarded 
        under this subsection for activities (including 
        planning activities) related to establishing an 
        American Health Benefit Exchange, as described in 
        subsection (b).
          [(4) Renewability of grant.--
                  [(A) In general.--Subject to subsection 
                (d)(4), the Secretary may renew a grant awarded 
                under paragraph (1) if the State recipient of 
                such grant--
                          [(i) is making progress, as 
                        determined by the Secretary, toward--
                                  [(I) establishing an 
                                Exchange; and
                                  [(II) implementing the 
                                reforms described in subtitles 
                                A and C (and the amendments 
                                made by such subtitles); and
                          [(ii) is meeting such other 
                        benchmarks as the Secretary may 
                        establish.
                  [(B) Limitation.--No grant shall be awarded 
                under this subsection after January 1, 2015.
          [(5) Technical assistance to facilitate participation 
        in shop exchanges.--The Secretary shall provide 
        technical assistance to States to facilitate the 
        participation of qualified small businesses in such 
        States in SHOP Exchanges.]

           *       *       *       *       *       *       *


  TITLE IV--PREVENTION OF CHRONIC DISEASE AND IMPROVING PUBLIC HEALTH

Subtitle A--Modernizing Disease Prevention and Public Health Systems

           *       *       *       *       *       *       *


[SEC. 4002. PREVENTION AND PUBLIC HEALTH FUND.

  [(a) Purpose.--It is the purpose of this section to establish 
a Prevention and Public Health Fund (referred to in this 
section as the ``Fund''), to be administered through the 
Department of Health and Human Services, Office of the 
Secretary, to provide for expanded and sustained national 
investment in prevention and public health programs to improve 
health and help restrain the rate of growth in private and 
public sector health care costs.
  [(b) Funding.--There are hereby authorized to be 
appropriated, and appropriated, to the Fund, out of any monies 
in the Treasury not otherwise appropriated--
          [(1) for fiscal year 2010, $500,000,000;
          [(2) for each of fiscal years 2012 through 2017, 
        $1,000,000,000;
          [(3) for each of fiscal years 2018 and 2019, 
        $1,250,000,000;
          [(4) for each of fiscal years 2020 and 2021, 
        $1,500,000,000; and
          [(5) for fiscal year 2022, and each fiscal year 
        thereafter, $2,000,000,000.
  [(c) Use of Fund.--The Secretary shall transfer amounts in 
the Fund to accounts within the Department of Health and Human 
Services to increase funding, over the fiscal year 2008 level, 
for programs authorized by the Public Health Service Act, for 
prevention, wellness, and public health activities including 
prevention research, health screenings, and initiatives, such 
as the Community Transformation grant program, the Education 
and Outreach Campaign Regarding Preventive Benefits, and 
immunization programs.
  [(d) Transfer authority.--The Committee on Appropriations of 
the Senate and the Committee on Appropriations of the House of 
Representatives may provide for the transfer of funds in the 
Fund to eligible activities under this section, subject to 
subsection (c).]

           *       *       *       *       *       *       *

                              ----------                              


SOCIAL SECURITY ACT

           *       *       *       *       *       *       *


     TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                             SIMPLIFICATION

Part A--General Provisions

           *       *       *       *       *       *       *


SEC. 1108. ADDITIONAL GRANTS TO PUERTO RICO, THE VIRGIN ISLANDS, GUAM, 
                    AND AMERICAN SAMOA; LIMITATION ON TOTAL PAYMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Medicaid Payments to Territories for Fiscal Year 1998 and 
Thereafter.--
          (1) * * *
          (2) Fiscal year 1999 and thereafter.--Notwithstanding 
        subsection (f) and subject to paragraph (3) and section 
        1323(a)(2) of the Patient Protection and Affordable 
        Care Act [paragraphs (3) and (5)], with respect to 
        fiscal year 1999 and any fiscal year thereafter, the 
        total amount certified by the Secretary under title XIX 
        for payment to--
                  (A) * * *

           *       *       *       *       *       *       *

          (4) Exclusion of certain expenditures from payment 
        limits.--With respect to fiscal years beginning with 
        fiscal year 2009, if Puerto Rico, the Virgin Islands, 
        Guam, the Northern Mariana Islands, or American Samoa 
        qualify for a payment under subparagraph (A)(i), (B), 
        or (F) of section 1903(a)(3) for a calendar quarter of 
        such fiscal year, the payment shall not be taken into 
        account in applying subsection (f) (as increased in 
        accordance with paragraphs (1), (2), [(3), and (4) of 
        this subsection] and (3) of this subsection) to such 
        commonwealth or territory for such fiscal year.
          [(5) Additional increase.--The Secretary shall 
        increase the amounts otherwise determined under this 
        subsection for Puerto Rico, the Virgin Islands, Guam, 
        the Northern Mariana Islands, and American Samoa (after 
        the application of subsection (f) and the preceding 
        paragraphs of this subsection) for the period beginning 
        July 1, 2011, and ending on September 30, 2019, by such 
        amounts that the total additional payments under title 
        XIX to such territories equals $6,300,000,000 for such 
        period. The Secretary shall increase such amounts in 
        proportion to the amounts applicable to such 
        territories under this subsection and subsection (f) on 
        the date of enactment of this paragraph.]

           *       *       *       *       *       *       *


TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *


                   STATE PLANS FOR MEDICAL ASSISTANCE

  Sec. 1902. (a) A State plan for medical assistance must--
          (1) * * *

           *       *       *       *       *       *       *

          [(74) provide for maintenance of effort under the 
        State plan or under any waiver of the plan in 
        accordance with subsection (gg); and]

           *       *       *       *       *       *       *

  (e)(1) * * *

           *       *       *       *       *       *       *

          (14) Income determined using modified adjusted gross 
        income.--
                  (A) In general.--Notwithstanding subsection 
                (r) or any other provision of this title, 
                except as provided in subparagraph (D), for 
                purposes of determining income eligibility for 
                medical assistance under the State plan or 
                under any waiver of such plan and for any other 
                purpose applicable under the plan or waiver for 
                which a determination of income is required, 
                including with respect to the imposition of 
                premiums and cost-sharing, a State shall use 
                the modified adjusted gross income of an 
                individual and, in the case of an individual in 
                a family greater than 1, the household income 
                of such family. A State shall establish income 
                eligibility thresholds for populations to be 
                eligible for medical assistance under the State 
                plan or a waiver of the plan using modified 
                adjusted gross income and household income that 
                are not less than the effective income 
                eligibility levels that applied under the State 
                plan or waiver on the date of enactment of the 
                Patient Protection and Affordable Care Act. 
                [For purposes of complying with the maintenance 
                of effort requirements under subsection (gg) 
                during the transition to modified adjusted 
                gross income and household income, a State 
                shall, working with the Secretary, establish an 
                equivalent income test that ensures individuals 
                eligible for medical assistance under the State 
                plan or under a waiver of the plan on the date 
                of enactment of the Patient Protection and 
                Affordable Care Act, do not lose coverage under 
                the State plan or under a waiver of the plan.] 
                The Secretary may waive such provisions of this 
                title and title XXI as are necessary to ensure 
                that States establish income and eligibility 
                determination systems that protect 
                beneficiaries.

           *       *       *       *       *       *       *

  [(gg) Maintenance of Effort.--
          [(1) General requirement to maintain eligibility 
        standards until state exchange is fully operational.--
        Subject to the succeeding paragraphs of this 
        subsection, during the period that begins on the date 
        of enactment of the Patient Protection and Affordable 
        Care Act and ends on the date on which the Secretary 
        determines that an Exchange established by the State 
        under section 1311 of the Patient Protection and 
        Affordable Care Act is fully operational, as a 
        condition for receiving any Federal payments under 
        section 1903(a) for calendar quarters occurring during 
        such period, a State shall not have in effect 
        eligibility standards, methodologies, or procedures 
        under the State plan under this title or under any 
        waiver of such plan that is in effect during that 
        period, that are more restrictive than the eligibility 
        standards, methodologies, or procedures, respectively, 
        under the plan or waiver that are in effect on the date 
        of enactment of the Patient Protection and Affordable 
        Care Act.
          [(2) Continuation of eligibility standards for 
        children until october 1, 2019.--The requirement under 
        paragraph (1) shall continue to apply to a State 
        through September 30, 2019, with respect to the 
        eligibility standards, methodologies, and procedures 
        under the State plan under this title or under any 
        waiver of such plan that are applicable to determining 
        the eligibility for medical assistance of any child who 
        is under 19 years of age (or such higher age as the 
        State may have elected).
          [(3) Nonapplication.--During the period that begins 
        on January 1, 2011, and ends on December 31, 2013, the 
        requirement under paragraph (1) shall not apply to a 
        State with respect to nonpregnant, nondisabled adults 
        who are eligible for medical assistance under the State 
        plan or under a waiver of the plan at the option of the 
        State and whose income exceeds 133 percent of the 
        poverty line (as defined in section 2110(c)(5)) 
        applicable to a family of the size involved if, on or 
        after December 31, 2010, the State certifies to the 
        Secretary that, with respect to the State fiscal year 
        during which the certification is made, the State has a 
        budget deficit, or with respect to the succeeding State 
        fiscal year, the State is projected to have a budget 
        deficit. Upon submission of such a certification to the 
        Secretary, the requirement under paragraph (1) shall 
        not apply to the State with respect to any remaining 
        portion of the period described in the preceding 
        sentence.
          [(4) Determination of compliance.--
                  [(A) States shall apply modified adjusted 
                gross income.--A State's determination of 
                income in accordance with subsection (e)(14) 
                shall not be considered to be eligibility 
                standards, methodologies, or procedures that 
                are more restrictive than the standards, 
                methodologies, or procedures in effect under 
                the State plan or under a waiver of the plan on 
                the date of enactment of the Patient Protection 
                and Affordable Care Act for purposes of 
                determining compliance with the requirements of 
                paragraph (1), (2), or (3).
                  [(B) States may expand eligibility or move 
                waivered populations into coverage under the 
                state plan.--With respect to any period 
                applicable under paragraph (1), (2), or (3), a 
                State that applies eligibility standards, 
                methodologies, or procedures under the State 
                plan under this title or under any waiver of 
                the plan that are less restrictive than the 
                eligibility standards, methodologies, or 
                procedures, applied under the State plan or 
                under a waiver of the plan on the date of 
                enactment of the Patient Protection and 
                Affordable Care Act, or that makes individuals 
                who, on such date of enactment, are eligible 
                for medical assistance under a waiver of the 
                State plan, after such date of enactment 
                eligible for medical assistance through a State 
                plan amendment with an income eligibility level 
                that is not less than the income eligibility 
                level that applied under the waiver, or as a 
                result of the application of subclause (VIII) 
                of section 1902(a)(10)(A)(i), shall not be 
                considered to have in effect eligibility 
                standards, methodologies, or procedures that 
                are more restrictive than the standards, 
                methodologies, or procedures in effect under 
                the State plan or under a waiver of the plan on 
                the date of enactment of the Patient Protection 
                and Affordable Care Act for purposes of 
                determining compliance with the requirements of 
                paragraph (1), (2), or (3).]

           *       *       *       *       *       *       *


                           PAYMENT TO STATES

  Sec. 1903. (a) * * *

           *       *       *       *       *       *       *

  (w)(1) * * *

           *       *       *       *       *       *       *

  (4) For purposes of paragraph (1)(A)(iii), there is in effect 
a hold harmless provision with respect to a broad-based health 
care related tax imposed with respect to a class of items or 
services if the Secretary determines that any of the following 
applies:
          (A) * * *

           *       *       *       *       *       *       *

          (C)(i) * * *
          (ii) For purposes of clause (i), a determination of 
        the existence of an indirect guarantee shall be made 
        under paragraph (3)(i) of section 433.68(f) of title 
        42, Code of Federal Regulations, as in effect on 
        November 1, 2006, except that for portions of fiscal 
        years beginning on or after January 1, 2008, and before 
        October 1, 2011, and for portions of fiscal years 
        beginning on or after October 1, 2012, ``5.5 percent'' 
        shall be substituted for ``6 percent'' each place it 
        appears.
The provisions of this paragraph shall not prevent use of the 
tax to reimburse health care providers in a class for 
expenditures under this title nor preclude States from relying 
on such reimbursement to justify or explain the tax in the 
legislative process.

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 1905. For purposes of this title--
  (a) * * *
  (b) Subject to subsections (y), (z), and (aa) and section 
1933(d), the term ``Federal medical assistance percentage'' for 
any State shall be 100 per centum less the State percentage; 
and the State percentage shall be that percentage which bears 
the same ratio to 45 per centum as the square of the per capita 
income of such State bears to the square of the per capita 
income of the continental United States (including Alaska) and 
Hawaii; except that (1) the Federal medical assistance 
percentage shall in no case be less than 50 per centum or more 
than 83 per centum, (2) the Federal medical assistance 
percentage for Puerto Rico, the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa [shall be 55 
percent] shall be 50 percent, (3) for purposes of this title 
and title XXI, the Federal medical assistance percentage for 
the District of Columbia shall be 70 percent, and (4) the 
Federal medical assistance percentage shall be equal to the 
enhanced FMAP described in section 2105(b) with respect to 
medical assistance provided to individuals who are eligible for 
such assistance only on the basis of section 
1902(a)(10)(A)(ii)(XVIII). The Federal medical assistance 
percentage for any State shall be determined and promulgated in 
accordance with the provisions of section 1101(a)(8)(B). 
Notwithstanding the first sentence of this section, the Federal 
medical assistance percentage shall be 100 per centum with 
respect to amounts expended as medical assistance for services 
which are received through an Indian Health Service facility 
whether operated by the Indian Health Service or by an Indian 
tribe or tribal organization (as defined in section 4 of the 
Indian Health Care Improvement Act). Notwithstanding the first 
sentence of this subsection, in the case of a State plan that 
meets the condition described in subsection (u)(1), with 
respect to expenditures (other than expenditures under section 
1923) described in subsection (u)(2)(A) or subsection (u)(3) 
for the State for a fiscal year, and that do not exceed the 
amount of the State's available allotment under section 2104, 
the Federal medical assistance percentage is equal to the 
enhanced FMAP described in section 2105(b).

           *       *       *       *       *       *       *


  ADJUSTMENT IN PAYMENT FOR INPATIENT HOSPITAL SERVICES FURNISHED BY 
                    DISPROPORTIONATE SHARE HOSPITALS

  Sec. 1923. (a) * * *

           *       *       *       *       *       *       *

  (f) Limitation on Federal Financial Participation.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) State dsh allotments for fiscal year 2003 and 
        thereafter.--
                  (A) In general.--Except as provided in 
                [paragraphs (6), (7), and (8)] paragraphs (6), 
                (7), (8), and (9) and subparagraph (E), the DSH 
                allotment for any State for fiscal year 2003 
                and each succeeding fiscal year is equal to the 
                DSH allotment for the State for the preceding 
                fiscal year under paragraph (2) or this 
                paragraph, increased, subject to subparagraphs 
                (B) and (C) and paragraph (5), by the 
                percentage change in the consumer price index 
                for all urban consumers (all items; U.S. city 
                average), for the previous fiscal year.

           *       *       *       *       *       *       *

          (9) Rebasing of state dsh allotments for fiscal year 
        2022.--With respect to fiscal 2022, for purposes of 
        applying paragraph (3)(A) to determine the DSH 
        allotment for a State, the amount of the DSH allotment 
        for the State under paragraph (3) for fiscal year 2021 
        shall be treated as if it were such amount as reduced 
        under paragraph (7).
          [(9)] (10) Definition of state.--In this subsection, 
        the term ``State'' means the 50 States and the District 
        of Columbia.

           *       *       *       *       *       *       *


TITLE XXI--STATE CHILDREN'S HEALTH INSURANCE PROGRAM

           *       *       *       *       *       *       *


SEC. 2104. ALLOTMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (n) Child Enrollment Contingency Fund.--
          (1) * * *
          (2) Deposits into fund.--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(D) Availability of excess funds for 
                performance bonuses.--Any amounts in excess of 
                the aggregate cap described in subparagraph (B) 
                for a fiscal year or period shall be made 
                available for purposes of carrying out section 
                2105(a)(3) for any succeeding fiscal year and 
                the Secretary of the Treasury shall reduce the 
                amount in the Fund by the amount so made 
                available.]

           *       *       *       *       *       *       *


SEC. 2105. PAYMENTS TO STATES.

  (a) Payments.--
          (1) * * *

           *       *       *       *       *       *       *

          [(3) Performance bonus payment to offset additional 
        medicaid and chip child enrollment costs resulting from 
        enrollment and retention efforts.--
                  [(A) In general.--In addition to the payments 
                made under paragraph (1), for each fiscal year 
                (beginning with fiscal year 2009 and ending 
                with fiscal year 2013), the Secretary shall pay 
                from amounts made available under subparagraph 
                (E), to each State that meets the condition 
                under paragraph (4) for the fiscal year, an 
                amount equal to the amount described in 
                subparagraph (B) for the State and fiscal year. 
                The payment under this paragraph shall be made, 
                to a State for a fiscal year, as a single 
                payment not later than the last day of the 
                first calendar quarter of the following fiscal 
                year.
                  [(B) Amount for above baseline medicaid child 
                enrollment costs.--Subject to subparagraph (E), 
                the amount described in this subparagraph for a 
                State for a fiscal year is equal to the sum of 
                the following amounts:
                          [(i) First tier above baseline 
                        medicaid enrollees.--An amount equal to 
                        the number of first tier above baseline 
                        child enrollees (as determined under 
                        subparagraph (C)(i)) under title XIX 
                        for the State and fiscal year, 
                        multiplied by 15 percent of the 
                        projected per capita State Medicaid 
                        expenditures (as determined under 
                        subparagraph (D)) for the State and 
                        fiscal year under title XIX.
                          [(ii) Second tier above baseline 
                        medicaid enrollees.--An amount equal to 
                        the number of second tier above 
                        baseline child enrollees (as determined 
                        under subparagraph (C)(ii)) under title 
                        XIX for the State and fiscal year, 
                        multiplied by 62.5 percent of the 
                        projected per capita State Medicaid 
                        expenditures (as determined under 
                        subparagraph (D)) for the State and 
                        fiscal year under title XIX.
                  [(C) Number of first and second tier above 
                baseline child enrollees; baseline number of 
                child enrollees.--For purposes of this 
                paragraph:
                          [(i) First tier above baseline child 
                        enrollees.--The number of first tier 
                        above baseline child enrollees for a 
                        State for a fiscal year under title XIX 
                        is equal to the number (if any, as 
                        determined by the Secretary) by which--
                                  [(I) the monthly average 
                                unduplicated number of 
                                qualifying children (as defined 
                                in subparagraph (F)) enrolled 
                                during the fiscal year under 
                                the State plan under title XIX; 
                                exceeds
                                  [(II) the baseline number of 
                                enrollees described in clause 
                                (iii) for the State and fiscal 
                                year under title XIX;
                        but not to exceed 10 percent of the 
                        baseline number of enrollees described 
                        in subclause (II).
                          [(ii) Second tier above baseline 
                        child enrollees.--The number of second 
                        tier above baseline child enrollees for 
                        a State for a fiscal year under title 
                        XIX is equal to the number (if any, as 
                        determined by the Secretary) by which--
                                  [(I) the monthly average 
                                unduplicated number of 
                                qualifying children (as defined 
                                in subparagraph (F)) enrolled 
                                during the fiscal year under 
                                title XIX as described in 
                                clause (i)(I); exceeds
                                  [(II) the sum of the baseline 
                                number of child enrollees 
                                described in clause (iii) for 
                                the State and fiscal year under 
                                title XIX, as described in 
                                clause (i)(II), and the maximum 
                                number of first tier above 
                                baseline child enrollees for 
                                the State and fiscal year under 
                                title XIX, as determined under 
                                clause (i).
                          [(iii) Baseline number of child 
                        enrollees.--Subject to subparagraph 
                        (H), the baseline number of child 
                        enrollees for a State under title XIX--
                                  [(I) for fiscal year 2009 is 
                                equal to the monthly average 
                                unduplicated number of 
                                qualifying children enrolled in 
                                the State plan under title XIX 
                                during fiscal year 2007 
                                increased by the population 
                                growth for children in that 
                                State from 2007 to 2008 (as 
                                estimated by the Bureau of the 
                                Census) plus 4 percentage 
                                points, and further increased 
                                by the population growth for 
                                children in that State from 
                                2008 to 2009 (as estimated by 
                                the Bureau of the Census) plus 
                                4 percentage points;
                                  [(II) for each of fiscal 
                                years 2010, 2011, and 2012, is 
                                equal to the baseline number of 
                                child enrollees for the State 
                                for the previous fiscal year 
                                under title XIX, increased by 
                                the population growth for 
                                children in that State from the 
                                calendar year in which the 
                                respective fiscal year begins 
                                to the succeeding calendar year 
                                (as estimated by the Bureau of 
                                the Census) plus 3.5 percentage 
                                points;
                                  [(III) for each of fiscal 
                                years 2013, 2014, and 2015, is 
                                equal to the baseline number of 
                                child enrollees for the State 
                                for the previous fiscal year 
                                under title XIX, increased by 
                                the population growth for 
                                children in that State from the 
                                calendar year in which the 
                                respective fiscal year begins 
                                to the succeeding calendar year 
                                (as estimated by the Bureau of 
                                the Census) plus 3 percentage 
                                points; and
                                  [(IV) for a subsequent fiscal 
                                year is equal to the baseline 
                                number of child enrollees for 
                                the State for the previous 
                                fiscal year under title XIX, 
                                increased by the population 
                                growth for children in that 
                                State from the calendar year in 
                                which the fiscal year involved 
                                begins to the succeeding 
                                calendar year (as estimated by 
                                the Bureau of the Census) plus 
                                2 percentage points.
                  [(D) Projected per capita state medicaid 
                expenditures.--For purposes of subparagraph 
                (B), the projected per capita State Medicaid 
                expenditures for a State and fiscal year under 
                title XIX is equal to the average per capita 
                expenditures (including both State and Federal 
                financial participation) for children under the 
                State plan under such title, including under 
                waivers but not including such children 
                eligible for assistance by virtue of the 
                receipt of benefits under title XVI, for the 
                most recent fiscal year for which actual data 
                are available (as determined by the Secretary), 
                increased (for each subsequent fiscal year up 
                to and including the fiscal year involved) by 
                the annual percentage increase in per capita 
                amount of National Health Expenditures (as 
                estimated by the Secretary) for the calendar 
                year in which the respective subsequent fiscal 
                year ends and multiplied by a State matching 
                percentage equal to 100 percent minus the 
                Federal medical assistance percentage (as 
                defined in section 1905(b)) for the fiscal year 
                involved.
                  [(E) Amounts available for payments.--
                          [(i) Initial appropriation.--Out of 
                        any money in the Treasury not otherwise 
                        appropriated, there are appropriated 
                        $3,225,000,000 for fiscal year 2009 for 
                        making payments under this paragraph, 
                        to be available until expended.
                          [(ii) Transfers.--Notwithstanding any 
                        other provision of this title, the 
                        following amounts shall also be 
                        available, without fiscal year 
                        limitation, for making payments under 
                        this paragraph:
                                  [(I) Unobligated national 
                                allotment.--
                                          [(aa) Fiscal years 
                                        2009 through 2012.--As 
                                        of December 31 of 
                                        fiscal year 2009, and 
                                        as of December 31 of 
                                        each succeeding fiscal 
                                        year through fiscal 
                                        year 2012, the portion, 
                                        if any, of the amount 
                                        appropriated under 
                                        subsection (a) for such 
                                        fiscal year that is 
                                        unobligated for 
                                        allotment to a State 
                                        under subsection (m) 
                                        for such fiscal year or 
                                        set aside under 
                                        subsection (a)(3) or 
                                        (b)(2) of section 2111 
                                        for such fiscal year.
                                          [(bb) First half of 
                                        fiscal year 2013.--As 
                                        of December 31 of 
                                        fiscal year 2013, the 
                                        portion, if any, of the 
                                        sum of the amounts 
                                        appropriated under 
                                        subsection (a)(16)(A) 
                                        and under section 108 
                                        of the Children's 
                                        Health Insurance 
                                        Reauthorization Act of 
                                        2009 for the period 
                                        beginning on October 1, 
                                        2012, and ending on 
                                        March 31, 2013, that is 
                                        unobligated for 
                                        allotment to a State 
                                        under subsection (m) 
                                        for such fiscal year or 
                                        set aside under 
                                        subsection (b)(2) of 
                                        section 2111 for such 
                                        fiscal year.
                                          [(cc) Second half of 
                                        fiscal year 2013.--As 
                                        of June 30 of fiscal 
                                        year 2013, the portion, 
                                        if any, of the amount 
                                        appropriated under 
                                        subsection (a)(16)(B) 
                                        for the period 
                                        beginning on April 1, 
                                        2013, and ending on 
                                        September 30, 2013, 
                                        that is unobligated for 
                                        allotment to a State 
                                        under subsection (m) 
                                        for such fiscal year or 
                                        set aside under 
                                        subsection (b)(2) of 
                                        section 2111 for such 
                                        fiscal year.
                                  [(II) Unexpended allotments 
                                not used for redistribution.--
                                As of November 15 of each of 
                                fiscal years 2010 through 2013, 
                                the total amount of allotments 
                                made to States under section 
                                2104 for the second preceding 
                                fiscal year (third preceding 
                                fiscal year in the case of the 
                                fiscal year 2006, 2007, and 
                                2008 allotments) that is not 
                                expended or redistributed under 
                                section 2104(f) during the 
                                period in which such allotments 
                                are available for obligation.
                                  [(III) Excess child 
                                enrollment contingency funds.--
                                As of October 1 of each of 
                                fiscal years 2010 through 2013, 
                                any amount in excess of the 
                                aggregate cap applicable to the 
                                Child Enrollment Contingency 
                                Fund for the fiscal year under 
                                section 2104(n).
                          [(iii) Proportional reduction.--If 
                        the sum of the amounts otherwise 
                        payable under this paragraph for a 
                        fiscal year exceeds the amount 
                        available for the fiscal year under 
                        this subparagraph, the amount to be 
                        paid under this paragraph to each State 
                        shall be reduced proportionally.
                  [(F) Qualifying children defined.--
                          [(i) In general.--For purposes of 
                        this subsection, subject to clauses 
                        (ii) and (iii), the term ``qualifying 
                        children'' means children who meet the 
                        eligibility criteria (including income, 
                        categorical eligibility, age, and 
                        immigration status criteria) in effect 
                        as of July 1, 2008, for enrollment 
                        under title XIX, taking into account 
                        criteria applied as of such date under 
                        title XIX pursuant to a waiver under 
                        section 1115.
                          [(ii) Limitation.--A child described 
                        in clause (i) who is provided medical 
                        assistance during a presumptive 
                        eligibility period under section 1920A 
                        shall be considered to be a 
                        ``qualifying child'' only if the child 
                        is determined to be eligible for 
                        medical assistance under title XIX.
                          [(iii) Exclusion.--Such term does not 
                        include any children for whom the State 
                        has made an election to provide medical 
                        assistance under paragraph (4) of 
                        section 1903(v) or any children 
                        enrolled on or after October 1, 2013.
                  [(G) Application to commonwealths and 
                territories.--The provisions of subparagraph 
                (G) of section 2104(n)(3) shall apply with 
                respect to payment under this paragraph in the 
                same manner as such provisions apply to payment 
                under such section.
                  [(H) Application to states that implement a 
                Medicaid expansion for children after fiscal 
                year 2008.--In the case of a State that 
                provides coverage under section 115 of the 
                Children's Health Insurance Program 
                Reauthorization Act of 2009 for any fiscal year 
                after fiscal year 2008--
                          [(i) any child enrolled in the State 
                        plan under title XIX through the 
                        application of such an election shall 
                        be disregarded from the determination 
                        for the State of the monthly average 
                        unduplicated number of qualifying 
                        children enrolled in such plan during 
                        the first 3 fiscal years in which such 
                        an election is in effect; and
                          [(ii) in determining the baseline 
                        number of child enrollees for the State 
                        for any fiscal year subsequent to such 
                        first 3 fiscal years, the baseline 
                        number of child enrollees for the State 
                        under title XIX for the third of such 
                        fiscal years shall be the monthly 
                        average unduplicated number of 
                        qualifying children enrolled in the 
                        State plan under title XIX for such 
                        third fiscal year.
          [(4) Enrollment and retention provisions for 
        children.--For purposes of paragraph (3)(A), a State 
        meets the condition of this paragraph for a fiscal year 
        if it is implementing at least 5 of the following 
        enrollment and retention provisions (treating each 
        subparagraph as a separate enrollment and retention 
        provision) throughout the entire fiscal year:
                  [(A) Continuous eligibility.--The State has 
                elected the option of continuous eligibility 
                for a full 12 months for all children described 
                in section 1902(e)(12) under title XIX under 19 
                years of age, as well as applying such policy 
                under its State child health plan under this 
                title.
                  [(B) Liberalization of asset requirements.--
                The State meets the requirement specified in 
                either of the following clauses:
                          [(i) Elimination of asset test.--The 
                        State does not apply any asset or 
                        resource test for eligibility for 
                        children under title XIX or this title.
                          [(ii) Administrative verification of 
                        assets.--The State--
                                  [(I) permits a parent or 
                                caretaker relative who is 
                                applying on behalf of a child 
                                for medical assistance under 
                                title XIX or child health 
                                assistance under this title to 
                                declare and certify by 
                                signature under penalty of 
                                perjury information relating to 
                                family assets for purposes of 
                                determining and redetermining 
                                financial eligibility; and
                                  [(II) takes steps to verify 
                                assets through means other than 
                                by requiring documentation from 
                                parents and applicants except 
                                in individual cases of 
                                discrepancies or where 
                                otherwise justified.
                  [(C) Elimination of in-person interview 
                requirement.--The State does not require an 
                application of a child for medical assistance 
                under title XIX (or for child health assistance 
                under this title), including an application for 
                renewal of such assistance, to be made in 
                person nor does the State require a face-to-
                face interview, unless there are discrepancies 
                or individual circumstances justifying an in-
                person application or face-to-face interview.
                  [(D) Use of joint application for medicaid 
                and chip.--The application form and 
                supplemental forms (if any) and information 
                verification process is the same for purposes 
                of establishing and renewing eligibility for 
                children for medical assistance under title XIX 
                and child health assistance under this title.
                  [(E) Automatic renewal (use of administrative 
                renewal).--
                          [(i) In general.--The State provides, 
                        in the case of renewal of a child's 
                        eligibility for medical assistance 
                        under title XIX or child health 
                        assistance under this title, a pre-
                        printed form completed by the State 
                        based on the information available to 
                        the State and notice to the parent or 
                        caretaker relative of the child that 
                        eligibility of the child will be 
                        renewed and continued based on such 
                        information unless the State is 
                        provided other information. Nothing in 
                        this clause shall be construed as 
                        preventing a State from verifying, 
                        through electronic and other means, the 
                        information so provided.
                          [(ii) Satisfaction through 
                        demonstrated use of ex parte process.--
                        A State shall be treated as satisfying 
                        the requirement of clause (i) if 
                        renewal of eligibility of children 
                        under title XIX or this title is 
                        determined without any requirement for 
                        an in-person interview, unless 
                        sufficient information is not in the 
                        State's possession and cannot be 
                        acquired from other sources (including 
                        other State agencies) without the 
                        participation of the applicant or the 
                        applicant's parent or caretaker 
                        relative.
                  [(F) Presumptive eligibility for children.--
                The State is implementing section 1920A under 
                title XIX as well as, pursuant to section 
                2107(e)(1), under this title.
                  [(G) Express lane.--The State is implementing 
                the option described in section 1902(e)(13) 
                under title XIX as well as, pursuant to section 
                2107(e)(1), under this title.
                  [(H) Premium assistance subsidies.--The State 
                is implementing the option of providing premium 
                assistance subsidies under section 2105(c)(10) 
                or section 1906A.]

           *       *       *       *       *       *       *

  (d) Maintenance of Effort.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) [Continuation of eligibility standards for 
        children until october 1, 2019] Continuity of 
        coverage.--
                  [(A) In general.--During the period that 
                begins on the date of enactment of the Patient 
                Protection and Affordable Care Act and ends on 
                September 30, 2019, as a condition of receiving 
                payments under section 1903(a), a State shall 
                not have in effect eligibility standards, 
                methodologies, or procedures under its State 
                child health plan (including any waiver under 
                such plan) for children (including children 
                provided medical assistance for which payment 
                is made under section 2105(a)(1)(A)) that are 
                more restrictive than the eligibility 
                standards, methodologies, or procedures, 
                respectively, under such plan (or waiver) as in 
                effect on the date of enactment of that Act. 
                The preceding sentence shall not be construed 
                as preventing a State during such period from--
                          [(i) applying eligibility standards, 
                        methodologies, or procedures for 
                        children under the State child health 
                        plan or under any waiver of the plan 
                        that are less restrictive than the 
                        eligibility standards, methodologies, 
                        or procedures, respectively, for 
                        children under the plan or waiver that 
                        are in effect on the date of enactment 
                        of such Act;
                          [(ii) after September 30, 2015, 
                        enrolling children eligible to be 
                        targeted low-income children under the 
                        State child health plan in a qualified 
                        health plan that has been certified by 
                        the Secretary under subparagraph (C); 
                        or
                          [(iii) imposing a limitation 
                        described in section 2112(b)(7) for a 
                        fiscal year in order to limit 
                        expenditures under the State child 
                        health plan to those for which Federal 
                        financial participation is available 
                        under this section for the fiscal 
                        year.]
                  [(B)] (A) Assurance of exchange coverage for 
                targeted low-income children unable to be 
                provided child health assistance as a result of 
                funding shortfalls.--In the event that 
                allotments provided under section 2104 are 
                insufficient to provide coverage to all 
                children who are eligible to be targeted low-
                income children under the State child health 
                plan under this title, a State shall establish 
                procedures to ensure that such children are 
                screened for eligibility for medical assistance 
                under the State plan under title XIX or a 
                waiver of that plan and, if found eligible, 
                enrolled in such plan or a waiver. In the case 
                of such children who, as a result of such 
                screening, are determined to not be eligible 
                for medical assistance under the State plan or 
                a waiver under title XIX, the State shall 
                establish procedures to ensure that the 
                children are enrolled in a qualified health 
                plan that has been certified by the Secretary 
                under subparagraph (C) and is offered through 
                an Exchange established by the State under 
                section 1311 of the Patient Protection and 
                Affordable Care Act. For purposes of 
                eligibility for premium assistance for the 
                purchase of a qualified health plan under 
                section 36B of the Internal Revenue Code of 
                1986 and reduced cost-sharing under section 
                1402 of the Patient Protection and Affordable 
                Care Act, children described in the preceding 
                sentence shall be deemed to be ineligible for 
                coverage under the State child health plan.
                  [(C)] (B) Certification of comparability of 
                pediatric coverage offered by qualified health 
                plans.--With respect to each State, the 
                Secretary, not later than April 1, 2015, shall 
                review the benefits offered for children and 
                the cost-sharing imposed with respect to such 
                benefits by qualified health plans offered 
                through an Exchange established by the State 
                under section 1311 of the Patient Protection 
                and Affordable Care Act and shall certify those 
                plans that offer benefits for children and 
                impose cost-sharing with respect to such 
                benefits that the Secretary determines are at 
                least comparable to the benefits offered and 
                cost-sharing protections provided under the 
                State child health plan.

           *       *       *       *       *       *       *


SEC. 2111. PHASE-OUT OF COVERAGE FOR NONPREGNANT CHILDLESS ADULTS; 
                    CONDITIONS FOR COVERAGE OF PARENTS.

  (a) * * *
  (b) Rules and Conditions for Coverage of Parents of Targeted 
Low-Income Children.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Outreach or coverage benchmarks.--For purposes of 
        paragraph (2), the outreach or coverage benchmarks 
        described in this paragraph are as follows:
                  (A) Significant child outreach campaign.--The 
                State--
                          (i) was awarded a grant under section 
                        2113 for fiscal year 2011; or
                          [(ii) implemented 1 or more of the 
                        enrollment and retention provisions 
                        described in section 2105(a)(4) for 
                        such fiscal year; or]

           *       *       *       *       *       *       *

                  [(C) State increasing enrollment of low-
                income children.--The State qualified for a 
                performance bonus payment under section 
                2105(a)(3)(B) for the most recent fiscal year 
                applicable under such section.]

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    The Committee's recommendations to the House Budget 
Committee are in response to reconciliation instructions from a 
Republican-proposed budget, H. Con. Res. 112.\1\ This budget 
slashes programs for the working class and poor in order to 
protect the defense industry and tax breaks for millionaires. 
Because Congressman Ryan's budget passed by the Republican 
majority refuses to take a balanced approach and refuses to ask 
millionaires to contribute to deficit reduction, this year's 
budget proposes to cut services that affect the middle class 
and most vulnerable individuals in the country. This unbalanced 
Republican budget would end the Medicare guarantee, cut the 
Medicaid program by 75% by 2050, and destroy jobs.
---------------------------------------------------------------------------
    \1\H. Con. Res. 112.
---------------------------------------------------------------------------
    The reconciliation instructions directed the Energy and 
Commerce Committee to cut $96.7 billion out of programs in its 
jurisdiction over ten years. The Majority chose to comply with 
those instructions by making cuts to Medicaid, public health, 
and the Affordable Care Act. These cuts are in addition to 
draconian cuts proposed in the underlying Republican budget 
resolution and are intended to offset the cost of eliminating 
the sequester on defense spending.
    These cuts proposed by the Majority most adversely affect 
vulnerable low-income Medicaid beneficiaries, would cause 
scores of Americans to lose health insurance coverage, and 
would set back efforts to promote prevention and improve health 
by cutting common sense investments like the Public Health and 
Prevention Fund. Savings are also achieved through wholesale 
and radical changes to the medical malpractice and tort 
liability laws of all 50 states. The Committee's 
recommendations cut health care by $114 billion over the next 
decade, and exceeded the Republican budget resolution's 
instructions by $17 billion.

                                TITLE I

Section 101: Repealing mandatory funding to States to establish 
        American Health Benefit Exchanges
    Section 101 of the reconciliation recommendations from the 
Committee on Energy and Commerce to the House Budget Committee 
repeals mandatory funding provided to states in the Patient 
Protection and Affordable Care Act to establish American Health 
Benefit Exchanges, cutting $14.5 billion over five and ten 
years or reducing the deficit by $15.4 billion over the decade 
when taking into consideration indirect revenue effects.

            Private Insurance Marketplace Prior to Health Reform 
                    Exchanges
    Private health coverage is provided primarily through 
employers. In 2010, about 170 million nonelderly people were 
insured through employer sponsored health insurance.\2\ For the 
smallest firms, those with less than 10 workers, premiums were 
18% higher than those paid by firms with 100 or more workers 
and may not include broker fees.\3\ Increasing costs of health 
insurance have led some small employers to drop coverage, with 
the share of small business employees enrolled in employer-
sponsored coverage decreasing from 43% to 36% from 1999-
2009.\4\
---------------------------------------------------------------------------
    \2\U.S. Census Bureau, Highlights: 2012, (September 14, 2011) 
(online at http://www.census.gov/hhes/www/hlthins/data/incpovhltb/2010/
highlights.html)
    \3\S. Collins, et al, Realizing Health Reform's Potential: Small 
Businesses and the Affordable Care Act of 2010 (September 2010) (online 
at http://www.commonwealthfund.org/ /media/Files/Publications/
Issue%20Brief/2010/Sep/Small%20Business/
1437_Collins_realizing_hlt_reform_potential_small_business_ACA_ib.pdf).
    \4\HealthCare.gov, Health Insurance Premiums: Past High Costs Will 
Become the Present and Future Without Health Reform (Jan. 28, 2011) 
(online at http://www.healthcare.gov/center/reports/
premiums01282011a.pdf).
---------------------------------------------------------------------------
    People without access to employer-sponsored insurance may 
obtain health insurance on their own, usually through the 
individual health insurance market. Only 14 million nonelderly 
people bought health insurance in the individual or non-group 
market while 50 million people were uninsured.\5\ About half 
the uninsured were self-employed or worked for a small 
business.\6\
---------------------------------------------------------------------------
    \5\Kaiser Family Foundation, Survey of People Who Purchase Their 
Own Insurance (June 2010) (online at http://www.kff.org/kaiserpolls/
upload/8077-R.pdf); and C. DeNavas, et al. Income, Poverty, and Health 
Insurance Coverage in the United States: 2009, U.S. Census Bureau 
(Sept. 2010) (online at http://www.census.gov/prod/2010pubs/p60-
238.pdf).
    \6\Healthcare: Statistics, Small Business and the healthcare 
Crisis, Small Business Majority (online at http://
www.smallbusinessmajority.org/small-business-research/statistics.php) 
(accessed April 25, 2011).
---------------------------------------------------------------------------
    Unlike employer-sponsored group coverage, in which 
eligibility in a group is guaranteed by federal and state laws 
and premiums are generally based on the risks associated with a 
group of beneficiaries, eligibility and initial premiums in the 
individual markets of many states are based largely on an 
individual's health status and risk characteristics.
    The Commonwealth Biennial Health Insurance Survey found 43% 
of adults who shopped for coverage in the individual market 
found it very difficult or impossible to find a plan that fit 
their needs.\7\ More than one-third of applicants were turned 
down by an insurance carrier or were charged a higher premium 
due to a health problem or were offered insurance that did not 
cover that health problem.\8\
---------------------------------------------------------------------------
    \7\S. Collins, et al, Help on the Horizon, Findings from the 
Commonwealth Biennial Health Insurance Survey of 2010 (March 2011) 
(online at http://www.commonwealthfund.org//media/Files/Surveys/2011/
1486Collins_help_on_the_horizon_2010_biennial_survey_report_FINAL_31611.
pdf).
    \8\Id.
---------------------------------------------------------------------------
    Practices of denying sick people insurance, charging them 
more, or offering them coverage that does not cover the 
illnesses they had when they sought insurance protect insurer 
risk pools and help lower premiums. But they are detrimental to 
a vibrant, healthy, and financially secure marketplace. These 
practices limit meaningful access to coverage for people who 
have developed health problems and results in uncertainty in 
coverage for those who receive insurance. They also hamper 
movement from jobs where insurance is offered to self-
employment or employment in a small business, resulting in job 
lock.

            American Health Benefit Exchanges
    The enactment of the Affordable Care Act (ACA) in March 
2010 started to put the American people back in charge of their 
health care by requiring insurance companies to be more 
transparent and accountable for their costs and actions. This 
law ended many of the worst insurance industry abuses in 2010, 
including arbitrary recessions of coverage when a person gets 
sick and denials of insurance for children with pre-existing 
conditions.\9\ In 2014, additional insurance reforms will bring 
Americans new rights and benefits and increase the quality of 
their health care and lower their costs. These reforms include 
no discrimination in premiums based on gender, no denials for 
pre-existing conditions for anyone, coverage of basic set of 
benefits and services, and no annual and lifetime limits on 
coverage for essential health benefits.\10\
---------------------------------------------------------------------------
    \9\The Patient Protection and Affordable Care Act is comprised of 
two public laws, The Patient Protection and Affordable Care Act, Public 
Law 111-148, and the Health Care Education and Reconciliation Act of 
2010, Public Law 111-152.
    \10\Id.
---------------------------------------------------------------------------
    The successes of these reforms rely on the new health 
insurance exchange marketplaces that will be established in 
2014 as required by the ACA. An exchange is a mechanism for 
organizing the health insurance marketplace to help consumers 
and small businesses shop for coverage in a way that permits 
easy comparison of available plan options based on price, 
benefits and services, and quality. Exchanges will provide a 
transparent, competitive marketplace for individuals and small 
businesses to buy coverage.
    The new marketplace will provide families and businesses 
advantages of pooling risk that were previously only available 
to the largest employers by creating a single risk pool within 
the individual and small business exchanges.\11\ By pooling 
people together, reducing transaction costs, and increasing 
transparency, exchanges create more efficient and competitive 
markets for individuals and small employers. The new 
marketplace keeps intact America's employer-based system while 
expanding access to tens of millions of people. Tax credits 
will make coverage more affordable for low- and middle-income 
families and eligible small businesses.
---------------------------------------------------------------------------
    \11\Section 1312(c) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    Beginning with an open enrollment period in 2013, exchanges 
will help individuals and small employers shop for, select, and 
enroll in high-quality, affordable private health plans that 
fit their needs at competitive prices. Exchanges will assist 
eligible individuals to receive premium tax credits or coverage 
through other federal or state health care programs.\12\ By 
providing one-stop shopping, exchanges will make purchasing 
health insurance easier and more transparent. Health plans 
offered in exchanges shall be required to be transparent and 
make disclosures of claims payment policies, enrollment and 
disenrollment data, data on denied claims, information on cost 
sharing and coverage, and more.\13\
---------------------------------------------------------------------------
    \12\Section 1311(b) and 1311(d)(4) of The Patient Protection and 
Affordable Care Act, Public Law 111-148 and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152.
    \13\Section 1311(e)(3) of The Patient Protection and Affordable 
Care Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    When fully implemented, health plans offered through 
exchanges will compete based on price and quality rather than 
market segmentation and risk selection. This directly relates 
with prohibition on medical underwriting and rate reforms that 
would also take effect in 2014.\14\ The non-partisan 
Congressional Budget Office (CBO) estimated that by 2022, 
approximately 26 million people will purchase their health 
insurance through exchanges.\15\
---------------------------------------------------------------------------
    \14\The Kaiser Family Foundation, Focus on Health Reform, (April 
2010) (online at http://www.kff.org/healthreform/upload/7908-02.pdf).
    \15\Congressional Budget Office, Health Insurance Exchanges: CBO's 
March 2012 Baseline, March 13, 2012.
---------------------------------------------------------------------------
            State versus Federal Exchanges
    The ACA requires that exchanges be developed and 
operational in every state for individual and small businesses 
by January 1, 2014.\16\ A state is first given the opportunity 
to set up a state exchange and can apply for grants for the 
establishment of this exchange. If the state does not elect to 
set up a state exchange, the Secretary of Health and Human 
Services (the Secretary) will set one up in the state for 
individuals and small businesses.
---------------------------------------------------------------------------
    \16\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    The state has significant flexibility in the type of 
exchange it would operate if it elects to establish a state 
exchange. The state could determine which insurers are 
permitted to offer products in the exchange. It could determine 
the variety of plans that could be offered, for example whether 
consumer driven health plans and health savings accounts are 
offered. The state could determine the governance structure. 
The state could determine whether to merge the individual and 
small group markets. The state could determine whether 
employers with over 50 employees are permitted into the 
exchange to purchase insurance over time. The state could 
determine their financing mechanism that will be used to 
operate the exchange in the future. The state could determine 
whether the exchange will be an active purchaser in selecting 
health plans to get the best price and quality for it's 
citizens. The state could determine the role brokers and agents 
will play in helping consumers enroll in qualified health plans 
in the exchange. The state could determine how involved the 
exchange will be in enforcing health insurance market standards 
as a part of their certification in tandem with the state 
health insurance commissioner.
    If the state does not elect to set up an exchange, which 
some states will not, the federal government will make these 
decisions and establish and operate an exchange in that non-
electing state.

            Oversight of Exchanges
    An exchange may operate in multiple states, if each state 
agrees to the operation of the exchange and if the Secretary 
approves.\17\ A state may have more than one exchange, called 
subsidiary exchanges, if each serves a geographically distinct 
area and the area served is adequately large.\18\ If the 
Secretary determines before 2013 that a state will not have an 
exchange operational by 2014 or will not be able to implement 
the standards, the Secretary is required (directly or through 
an agreement with a non-profit entity) to establish and operate 
an exchange in the state and to implement the standards.\19\
---------------------------------------------------------------------------
    \17\Section 1311(f) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
    \18\Id.
    \19\Section 1321 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    The Secretary, in coordination with the HHS Inspector 
General, will have authority to investigate exchanges. 
Exchanges will be subject to annual HHS audits.\20\ If the 
Secretary finds serious misconduct, payment otherwise due to 
the exchange may be rescinded, up to 1% of such payments, until 
corrective actions are taken that are deemed adequate by the 
Secretary.\21\ Payments made under the exchange provisions of 
the ACA are subject to the False Claims Act.\22\ The Government 
Accountability Office is required to review the operations and 
administration of the exchange.\23\ In addition, the Committee 
on Energy and Commerce, the Committee on Oversight and 
Government Reform, other congressional committees, and others 
can provide oversight of the implementation of the activities 
and expenditures under section 1311 of the Affordable Care 
Act.\24\
---------------------------------------------------------------------------
    \20\Section 1313 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
    \21\Id.
    \22\Id.
    \23\Id.
    \24\Id.
---------------------------------------------------------------------------
            Funding for Exchanges
    Section 1311 of the ACA requires the Secretary, within one 
year of enactment, to award grants to states to plan and 
establish exchanges.\25\ By January 1, 2014, each state must 
have an exchange to facilitate access to qualified health 
plans. The grants are provided to states making progress in 
establishing an exchange, implementing ACA's private health 
insurance market reforms, and meeting other benchmarks. 
However, no grant may be awarded after January 1, 2015, and 
after this date, operations of the exchange must be self-
sustaining using assessments on insurers or some other way to 
generate funds to support their operations.\26\ In addition, 
the grants must be used solely for the activities and functions 
listed in section 1311.\27\
---------------------------------------------------------------------------
    \25\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
    \26\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
    \27\Section 1311 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    Thus far, the Center for Consumer Information and Insurance 
Oversight (CCIIO) has awarded over $600 million in exchange 
planning grants and early innovator grants to 49 states and the 
District of Columbia along with four territories.\28\ States 
may use the exchange planning and establishment grants for a 
number of important planning activities, including research of 
their insurance markets, efforts to obtain the legislative 
authority to create exchanges, and steps to establish the 
governing structures of exchanges.\29\ States can use the early 
innovator grants to develop model Information Technology (IT) 
systems to operate the functions of the exchange.\30\ Such 
systems can be combined with state Medicaid systems and others, 
but all monies for the development of combined technology must 
be allocated according to the different programs. According to 
November 3, 2010, guidance from CMS, ``State Exchange grants 
will provide 100 percent support for Exchange IT infrastructure 
and . . . 90 percent matching rate will be available for the 
Exchange-related eligibility system changes as well as for 
those Medicaid system changes not directly related to the 
Exchanges.''
---------------------------------------------------------------------------
    \28\U.S. Department of Health and Human Services, Creating a New 
Competitive Marketplace: Health Insurance Exchange Establishment Grants 
Awards List (Jan. 24, 2012) online at
http://www.healthcare.gov/news/factsheets/2011/05/
exchanges05232011a.html).
    \29\U.S. Department of Health and Human Services, News Release: HHS 
Announces New Resources to Help States Implement Affordable Care Act 
(Jan. 20, 2011) online at http://www.hhs.gov/news/press/2011pres/01/
20110120b.html).
    \30\Healthcare.gov, States Leading the Way on Implementation: HHS 
Awards ``Early Innovator'' Grants to Seven States (online at http://
www.healthcare.gov/news/factsheets/Exchanges02162011a.html) (accessed 
April 8, 2011).
---------------------------------------------------------------------------
            Structure of Funding
    The structure of the funding for the establishment of 
exchanges has been criticized as being an open ended mandatory 
funding stream. However, mandatory time limited funding is 
consistent with previous laws passed by both parties.
    Having a mandatory and stable stream of funding for this 
central feature of the health insurance reforms is critical. 
Senator Harkin stated, in testimony for the record, that ``[T]o 
ensure the success of the Affordable Care Act, we needed to 
guarantee that reliable and predictable funding would be 
available for key programs. As the Chairman of both the Senate 
Committee on Health, Education, Labor, and Pensions and the 
Appropriations Subcommittee for Labor, Health and Human 
Services, and Education, I understand the implications of this 
guarantee--that Congress should mandate appropriations for 
certain programs in the Affordable Care Act that are 
fundamental to its success. This is a process that Congress has 
done many times in the past in various areas and there has been 
no controversy. It is now clear that those who want to repeal 
the Act are seeking to starve these important elements of funds 
in an effort to derail health reform.''
    In fact, in this regard, the Affordable Care Act was little 
different from other laws passed by Congress in recent years. 
It included a mix of discretionary program authorizations and 
mandatory spending.\31\ That mandatory spending was well-
documented at the time of passage and included in each CBO 
score of the legislation from the summer of 2009 through 
passage in March 2010.
---------------------------------------------------------------------------
    \31\Mandatory spending (also called direct spending) encompasses 
all spending not passed in the annual appropriations bills.
---------------------------------------------------------------------------
    Two examples of laws considered by the Energy and Commerce 
Committee when it was last under the control of Republicans in 
the 108th and 109th Congresses illustrate how Congress has 
previously used mandatory appropriations. These laws are the 
Medicare Prescription Drug Improvement and Modernization Act 
(P.L. No. 108-173) and the Deficit Reduction Act (P.L. No. 109-
171), both of which were spearheaded by Republican 
congressional leadership. These laws contained billions of 
dollars of mandatory appropriations funding a wide array of 
government activities.\32\
---------------------------------------------------------------------------
    \32\Committee on Energy and Commerce, Democratic Staff of Henry A. 
Waxman, Ranking Member, The Pius Proposal to Block Mandatory Funding in 
the Affordable Care Act, March 2011.
---------------------------------------------------------------------------
    The Medicare Prescription Drug Improvement and 
Modernization Act (P.L. No. 108-173) included specific 
mandatory appropriations, including an open ended but time 
limited mandatory appropriation for a drug assistance program. 
That program, like the exchange grants, served as a bridge 
until the full Medicare prescription drug benefit became 
effective.

            Analysis and Impact of H.R. 1213
    H.R. 1213 repeals the mandatory funding provided to states 
under the ACA to establish exchanges. This denies states the 
necessary funding to establish the new health insurance 
marketplace and undermines the work they have already done to 
implement exchanges. This legislation would rescind unobligated 
funds and would prohibit further funding, limiting states' 
ability to advance on the establishment of their exchanges.
    According to testimony for the record from Alan Weil, 
Executive Director of the National Academy for State Health 
Policy, ``[S]tates are doing their best to comply with the 
federal law and to implement the law in a manner that conforms 
to their own needs. Federal support for those activities is 
critical. One likely consequence of reduced federal funding is 
poor implementation, with state officials on the hook for 
failures that are not of their own making. Another likely 
consequence is states deciding to cede authority for 
implementation to the federal government--a decision most 
states would strongly prefer not to make.''
    Current budget deficits in most states have created 
difficult economic environments to establish state-based 
exchanges. Without grants from the Department of Health and 
Human Services, states will be forced to pay for exchange 
activities, along with outreach and education activities, on 
their own if they wish to establish a state run exchange. 
Exchange grants provide states the financial security needed to 
avoid wrestling with budget issues and worrying about self-
sustainability before January 1, 2015. The inevitable result of 
enactment of this legislation is that a number of states that 
would prefer to run their own exchanges will be unable to do 
so, and the default to federal control will be more likely to 
occur. Yet states are best positioned to establish the new 
marketplace for their residents.
    Already most states and the District of Columbia have shown 
an interest in setting up an exchange marketplace or sharing 
that responsibility with the federal government. A repeal of 
the exchange grants is effectively taking away from states the 
ability to set up exchanges or run important functions within a 
shared exchange.
    Numerous groups have expressed their opposition to these 
proposals including the American Hospital Association, the 
American Heart Association, the American Cancer Society--Cancer 
Action Network, American Federation of Teachers, Easter Seals, 
Main Street Alliance, National Alliance on the Mental Illness, 
National Partnership for Women and Families, Paralyzed Veterans 
of America, National Disability Rights Network, and AARP among 
others.

            Amendments
    Congressman Pallone offered an amendment to allow a state 
to receive exchange establishment grants if the governor of a 
state certifies that the state does not want the federal 
government to establish and operate an exchange within the 
state and wants to have the state establish and operate the 
exchange. The amendment was defeated on a party line vote.
    Congress members Schakowsky, Gonzalez, and Eshoo offered 
additional amendment having to do with retaining funds for the 
purposes of helping small business get health insurance if they 
choose to offer it, ensuring qualified health plans do not have 
annual or lifetime limits on coverage, and providing authority 
to deny or modify excessive or unjustified premium increases by 
insurance companies. All amendments were defeated.

Section 102: Repealing Prevention and Public Health Fund

    Section 102 of the Committee Prints\33\ is identical to 
H.R. 1217, legislation to repeal the Prevention and Public 
Health Fund, as reported by the Committee on April 11, 
2011,\34\ and passed by the House on April 13, 2011.\35\ Like 
H.R. 1217 itself, Section 102 should not become law.
---------------------------------------------------------------------------
    \33\Hereinafter cited as Section 102.
    \34\House Committee on Energy and Commerce, To Repeal the 
Prevention and Public Health Fund, 112th Cong. (2011) (H. Rept. 112-
57).
    \35\Congressional Record, H2633-2646 (Apr. 13, 2011).
---------------------------------------------------------------------------
    Enacted in 2010, the ACA\36\ expands access to health care 
for over 30 million Americans and improves health benefits for 
millions more who are already insured.\37\
---------------------------------------------------------------------------
    \36\The ACA is comprised of two public laws, Public Law No. 111-148 
and Public Law No. 111-152.
    \37\Congressional Budget Office, Updated Estimates for the 
Insurance Coverage Provisions of the Affordable Care Act (Mar. 2012) 
(online at www.cbo.govisitesidefault/files/cbofiles/attachments/03-13-
Coverage%20Estimates.pdf).
---------------------------------------------------------------------------
    But as valuable as it is, health insurance cannot do 
everything necessary to make our nation healthy. Even if other 
parts of the ACA make it possible for virtually everyone to be 
insured, there will still be a major role for public health. 
Moreover, there will be an ongoing need for funding for these 
public health activities.
    ``Public health'' includes many different things:
     It is working with groups and whole communities to 
improve health, often more effectively than could be done 
between an individual provider and patient. Fluoridation of 
water for a town is, for instance, vastly better than simply 
filling every citizen's cavities. Exercise programs to prevent 
obesity are better than having to treat diabetes among people 
who become obese.
     It is tailoring health insurance and health care 
to prevent and diagnose disease early rather than simply 
treating it in its later stages. Immunizations are always 
better than outbreaks. Screening for hypertension is better 
than simply waiting for strokes.
     It is providing for safety-net services where the 
insurance market alone fails to do so. Community health 
centers, HIV-service providers, and breast and cervical cancer 
screening programs provide care to people who might not 
otherwise be able to find a provider. Health professions 
education programs can add to the primary care workforce when 
the market might produce only specialists. (Such programs will 
be even more necessary once the insurance expansion provisions 
of the ACA are implemented.)
     And, least glamorous but crucial, it is the 
infrastructure of daily disease control and health promotion. 
Closing down unsanitary restaurants is better than treating 
food poisoning. Compiling and studying epidemic trends can 
prevent major waves of disease.
    The case might be made clearer by analogy: No community 
would be well-served if all its homeowners had fire insurance 
but there were no fire departments, firefighters, fire 
hydrants, smoke detectors, or indoor sprinklers. That very 
well-insured town would still burn to the ground. Insurance is 
necessary, but it is nowhere near sufficient.
    The ACA addresses both approaches, with insurance and with 
public health. This required going beyond the investments in 
the law to provide health insurance to also include provisions 
to make significant public health investments.
    It would be insufficient simply to authorize future 
appropriations for these activities while providing mandatory 
spending for coverage initiatives. While the Committees on 
Appropriations of both the House and the Senate have shown 
ongoing and great leadership in these public health programs, 
the budget allocations for them have been too tight to allow 
significant new initiatives of these sorts. Consequently, the 
ACA provides as firm a funding and organizational base for 
these services as possible--mandatory spending--because they 
are essential in making insurance efficient and productive and 
in making the nation healthier.
    Among those programs designated for mandatory spending in 
the ACA is the Prevention and Public Health Fund (the Fund). 
Its purpose is ``to provide for expanded and sustained national 
investment in prevention and public health programs.''\38\ It 
is the first and only federal program with dedicated, ongoing 
resources specifically designed to improve the public's health, 
and in turn, to make the United States a healthier nation.
---------------------------------------------------------------------------
    \38\ACA, Section 4002.
---------------------------------------------------------------------------
    The Fund is administered by the Secretary of the Department 
of Health and Human Services (HHS) and may be used to support 
``programs authorized by the Public Health Service Act, for 
prevention, wellness, and public health activities.''\39\ When 
the Fund was initially created, it provided $5 billion in 
mandatory spending for these activities over the period FY 2010 
through FY 2014 and $2 billion in mandatory spending each 
fiscal year thereafter (for a total of $15 billion for FY 2010 
through FY 2019, and $17.75 billion for FY 2012 through FY 
2021).
---------------------------------------------------------------------------
    \39\Id.
---------------------------------------------------------------------------
    Recent legislation has reduced these authorized funding 
levels by $6.25 billion for FY 2012 through FY 2021,\40\ making 
it even more imperative to maintain both the Fund's mandatory 
spending mechanism and its currently-authorized spending 
amounts. Such resources are necessary to address the perpetual 
underfunding of prevention activities which by some estimates, 
account for only 3% of national health expenditures.\41\ This 
view is supported by an Institute of Medicine (IOM) report 
released earlier this month that reaffirms the importance of 
building upon existing streams of public health funding--
including the Prevention and Public Health Fund--to ensure our 
nation has an adequate infrastructure to improve health 
outcomes and to carry out other critical public health 
functions.\42\
---------------------------------------------------------------------------
    \40\Middle Class Tax Relief and Job Creation Act of 2012, Public 
Law No. 112-96.
    \41\Centers for Medicare and Medicaid Services, National Health 
Expenditure Data (online at www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/index.html?redirect=/NationalHealthExpendData/
) (accessed Apr. 18, 2012).
    \42\Institute of Medicine, For the Public's Health: Investing in a 
Healthier Future (Apr. 10, 2012) (online at www.iom.edu/Reports/2012/
For-the-Publics-Health-Investing-in-a-Healthier-Future.aspx).
---------------------------------------------------------------------------
    Support for prevention has long been on a bipartisan basis. 
Members of this Committee from both sides of the aisle and 
across the political spectrum have spoken strongly in favor of 
this public health function.\43\ Beyond the halls of Congress, 
this support is also widespread. A public opinion survey by 
Trust for America's Health and the Robert Wood Johnson 
Foundation found that 71% of Americans favored an increased 
investment in disease prevention.\44\ And nearly 800 national, 
state, and local organizations support the Fund as a primary 
vehicle for making public health investments that would not 
only help to improve the public's health, but also create jobs 
and lower long-term health care costs.\45\
---------------------------------------------------------------------------
    \43\See, e.g., comments made by Rep. Pitts during the Committee 
markup of Section 102, House Committee on Energy and Commerce, Markup 
on Proposed Matters for Inclusion in Reconciliation Recommendations, 
112th Cong., p. 90 (Apr. 25, 2012) (transcript of the proceeding):
     Rep. Pitts: ``The goals of the Fund are laudable and there 
is no doubt that we must focus on preventing disease rather than simply 
treating people once they have begun ill.''
    See also comments made by Reps. Pitts, Murphy, Matsui, and Cassidy 
in support of prevention efforts during the Committee markup of H.R. 
1217, House Committee on Energy and Commerce, Business Meeting to 
Markup H.R. 1217, To Repeal the Prevention and Public Health Fund, 
112th Cong., p. 242 (Apr. 5, 2011) (transcript of the proceeding):
     Rep. Pitts: ``I am not against prevention and wellness'';
     Rep. Murphy: ``I believe all of us are pretty strongly in 
favor of anything that has to do with prevention'';
     Rep. Matsui: ``We are talking about having healthier 
Americans. . . . ``[M]ost people here truly believe that prevention is 
probably the best way to do this''; and
     Rep. Cassidy: ``I strongly believe in many aspects of 
preventative medicine...''.
    \44\See http://healthyamericans.org/newsroom/releases/
?releaseid=198 for a description of the poll's complete findings.
    \45\Letter from Jeffrey Levi, PhD, Executive Director, Trust for 
America's Health (on behalf of 760 health-related organizations) to 
Chairman Fred Upton and Ranking Member Henry Waxman (Apr. 23, 2012) (on 
line at http://healthyamericans.org/health-issues/wp-content/uploads/
2012/04/Fund-Reconciliation-EC-April2012.pdf).
---------------------------------------------------------------------------
            Prevention Fund Dollars at Work
    The Prevention and Public Health Fund is one of a number of 
ACA initiatives that is already in place. Currently, all 50 
states and the District of Columbia are receiving Fund 
support.\46\
---------------------------------------------------------------------------
    \46\For a description of these activities and state-by-state 
information on the Fund, see Department of Health and Human Services, 
The Affordable Care Act's Prevention and Public Health Fund in Your 
State (online at www.healthcare.gov/news/factsheets/2011/02/
prevention02092011a.html) (accessed Apr. 27, 2012).
---------------------------------------------------------------------------
    In FY 2011, 61 states and communities serving approximately 
120 million Americans received funding to implement evidence-
based, community programs designed to reduce tobacco use, 
promote healthy living, prevent and control high blood pressure 
and high cholesterol, and address health disparities.\47\ 
Twenty percent of funds went to support rural and frontier 
populations. The Fund has also been used to provide flu shots 
and other immunizations; improve HIV/AIDS prevention through 
testing and linkages to care; expand mental health and injury 
prevention programs; train the public health workforce; and 
strengthen the public health infrastructure necessary to track 
and respond to disease outbreaks and disasters.\48\
---------------------------------------------------------------------------
    \47\HHS, The Community Transformation Grants Program (online at 
http://www.healthcare.gov/news/factsheets/2011/09/
community09272011a.html) (accessed Apr. 27, 2012).
    \48\Supra note 14.
---------------------------------------------------------------------------
    In general, the Fund is intended to provide support for 
programs generated at the local or community-based level. This 
is as it should be--communities know best what public health 
challenges they face and what interventions are most likely to 
work.

            Prevention Dollars Produce High Value Outcomes
    Preventable diseases cost the United States significant 
resources--in terms of unnecessary deaths, lost productivity, 
and enormous amounts of money. Indeed, over half of the deaths 
in this country are due to preventable causes such as tobacco 
use, diet and activity patterns, and alcohol use.\49\ Chronic 
diseases consume an estimated 75% of the nation's $2 trillion 
health care spending each year\50\, and cost employers $1,685 
for each employee each year, or $225.8 billion annually in lost 
productivity.\51\ Obesity alone costs $147 billion each 
year.\52\ A stable, ongoing investment in prevention can help 
alleviate each of these burdens.
---------------------------------------------------------------------------
    \49\McGinnis JM and Foege WH, Actual Causes of Death in the United 
States, JAMA, 270(18): 2207-2212 (Nov. 10, 1993).
    \50\Centers for Disease Control and Prevention, Chronic Disease: 
The Power to Prevent, the Call to Control, At-A-Glance (2009).
    \51\Centers for Disease Control and Prevention, Worker Productivity 
(online at www.cdc.gov/workplacehealthpromotion/businesscase/reasons/
productivity.html) (accessed Apr. 27, 2012).
    \52\Finkelstein EA, Trogdon JG, Cohen JW, et al., Annual Medical 
Spending Attributable to Obesity: Payer- and Service-Specific 
Estimates, Health Affairs, 28(5): w822-w831 (2009).
---------------------------------------------------------------------------
    It is true that some life-saving prevention interventions 
actually involve expenditures. But so do most life-saving drugs 
and devices. We provide mandatory funding for drugs and devices 
through programs such as Medicare and Medicaid because steady 
and secure funding for these programs ensures that more 
Americans can live longer and healthier lives. Prevention 
efforts can also reduce the number of deaths and promote the 
health of Americans and should, therefore, also be supported 
through the mandatory spending mechanism.
    Some forms of prevention do, of course, save money--
immunizations, for example, are among our most cost-effective 
public health investments. Community-based interventions can be 
cost-effective as well. According to the researchers at the New 
York Academy of Medicine, an investment of $10 per person per 
year in proven community-based interventions to increase 
physical activity, improve nutrition, and prevent smoking can 
save the country more than $16 billion each year--a return of 
$5.60 for every $1 invested.\53\ The Urban Institute estimates 
that certain proven community-based diabetes prevention 
programs can save as much as $191 billion over 10 years.\54\ A 
recent Trust for America's Health report concludes that a 
reduction of body mass index rates (the measure for obesity) 
nationwide that meets the HHS target of 5% would save over $158 
billion in 10 years.\55\
---------------------------------------------------------------------------
    \53\Levi, J. et al., Prevention for a Healthier America: 
Investments in Disease Prevention Yield Significant Savings, Stronger 
Communities, Trust for America's Health (Feb. 2009) (online at: http://
healthyamericans.org/reports/prevention08/Prevention08.pdf).
    \54\Berenson, R. et al., How We Can Pay for Health Reform, Urban 
Institute and Robert Wood Johnson Foundation (July 2009) (online at: 
http://urban.org/uploadedpdf/411932_howwecanpay.pdf).
    \55\Trust for America's Health, Bending the Obesity Cost Curve: 
Reducing Obesity Rates by Five Percent Could Lead to More Than $29 
Billion in Health Care Savings in Five Years (Jan. 2012) (online at 
http://healthyamericans.org/assets/files/
TFAH%2020120besityBrief06.pdf).
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            Mandatory Spending
    Despite the good and important work being done through the 
Fund, the health care savings it may help to produce, and the 
chronic underfunding of prevention activities in the past, 
Republicans are determined to bring the Fund to an end. They 
assert two principal arguments for their opposition to it: (1) 
the Fund's funding mechanism--mandatory spending; and (2) the 
Secretary's authority to determine how the Fund's monies will 
be allocated. The two arguments are interrelated; taken 
together, they present a misleading analysis of how the Fund is 
intended to operate.
    ACA Section 4002(b) provides for mandatory funding for the 
Fund. It authorizes to be appropriated and appropriates 
specified funding levels for FY 2010 and beyond. ACA Section 
4002(d) addresses the role of the congressional appropriations 
committees in specifying how the appropriated funds are to be 
used. This section clearly states that these committees have 
explicit authority to allocate monies from the Fund (in 
accordance with the Fund's purpose to support prevention and 
other public health activities). Senator Harkin (author of ACA 
Section 4002) addressed this very issue in a letter to the 
Committee, making it clear that it is the job of congressional 
appropriators to make the resource allocation decisions.\56\
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    \56\Testimony of Senator Tom Harkin (submitted for the record), 
Subcommittee on Health, Committee on Energy and Commerce, Hearing on 
Setting Fiscal Priorities in Health Care Funding, 112th Cong. (Mar. 9, 
2011) (stating, ``Contrary to misperceptions that it evades the 
appropriations process, the Fund was established . . . in such a way 
that appropriators direct how monies from the Funds are spent'').
---------------------------------------------------------------------------
    It is only when Congress fails to pass an HHS 
appropriations bill (or does not allocate the Fund in an 
appropriations bill) that the HHS Secretary would have the 
authority to designate which public health programs or 
activities would receive Fund support. While it is true that 
the Secretary has already exercised this authority, it is also 
true that she has deferred spending these monies when requested 
to do so by Congress.\57\
---------------------------------------------------------------------------
    \57\See the letter from Senator Tom Harkin, Chairman, Senate 
Committee on Health, Education, Labor, and Pensions and Chairman, 
Senate Subcommittee on Labor, Health and Human Services, Education, and 
Related Agencies, Committee on Appropriations to HHS Secretary Kathleen 
Sebelius (Jan. 4, 2011) in which he requested that the Secretary 
allocate monies in accordance with the prevention and public health 
priorities set forth in the proposed FY 2011 omnibus, year-long 
continuing resolution, including the Community Transformation Grants 
Program and tobacco prevention and control. The Secretary subsequently 
announced a spending plan for FY 2011 which closely tracked Chairman 
Harkin's request. (see HHS press release on line at www.hhs.gov/news/
press/2011pres/02/20110209b.html). At the request of Rep. Denny Rehberg 
and Rep. Harold Rogers, the Secretary delayed allocation of resources 
from the Fund for FY 2011. (Letter from Chairman Denny Rehberg, Chair, 
House Committee on Appropriations and Chairman Harold Rogers, Chair, 
Subcommittee on Labor, Health and Human Services, Education, and 
Related Agencies, House Committee on Appropriations to HHS Secretary 
Kathleen Sebelius (Mar. 2, 2011)).
---------------------------------------------------------------------------
    Contrary to what Republicans have suggested, monies from 
the Fund have been allocated and are being used in accordance 
with both the Fund's purpose\58\ and the public health needs of 
the country as well as HHS rules and regulations.\59\
---------------------------------------------------------------------------
    \58\The Section on Background and Need for Legislation for the 
majority views of this Committee report (Committee Prints: Proposed 
Matters for Inclusion in Reconciliation Recommendations) states the 
Fund has been used for dog neutering. HHS and CDC have confirmed that 
this statement is not accurate (e-mail from HHS to Democratic Staff, 
House Committee on Energy and Commerce (Apr. 25, 2012)). See also 
comments made by Rep. Schakowsky during the Committee markup on Section 
102, House Committee on Energy and Commerce, Committee Prints: Proposed 
Matters for Inclusion in Reconciliation Recommendations, 112th Cong., 
p. 233 (Apr. 25, 2012) (transcript of the proceeding).
    \59\The Section on Background and Need for Legislation for the 
majority views of this Committee report (Committee Prints: Proposed 
Matters for Inclusion in Reconciliation Recommendations) states that 
the Fund has been used to support construction activities. HHS guidance 
for the administration of Fund grants provides that ``recipients may 
not use funding for construction.'' (HHS, Public Prevention Health 
Fund: National Dissemination and Support for Community Transformation 
Grants (online at www.grants.gov/search/
search.do?oppId=99853&mode;=VIEW) (accessed Apr. 27, 2012). To our 
knowledge, this prohibition has not been violated.
---------------------------------------------------------------------------
    These points aside, we believe Republican arguments that 
have been made to end the Fund have been completely undermined 
by their own actions in recent weeks. During debate on Section 
102, Republicans asserted the annual appropriations process is 
a more appropriate way to fund programs and activities 
supported by the Fund.\60\ Yet, last month they voted 
overwhelmingly to reduce discretionary spending by $19 billion 
for FY 2013--an amount below the limits they supported in the 
Budget Control Act\61\ and voted earlier this month to endorse 
the Appropriations Committee recommendation to cut health, 
education, and labor programs by more than 40%.\62\
---------------------------------------------------------------------------
    \60\See, e.g., comments made by Rep. Guthrie (pp. 74-75) and Rep. 
Cassidy (pp. 99-100) during the Committee markup on Section 102, House 
Committee on Energy and Commerce, Committee Prints: Proposed Matters 
for Inclusion in Reconciliation Recommendations, 112th Cong., (Apr. 25, 
2012) (transcript of the proceeding).
    \61\U.S. House of Representatives, Roll Call Vote on Agreeing to H. 
Con. Res. 112 (March 29, 2012) (228 yeas, 191 nays).
    \62\House Committee on Appropriations, Report on the Suballocation 
of Budget Allocations for Fiscal Year 2013, 112th Cong. (Apr. 25, 2012) 
(online at http://appropriations.house.gov/UploadedFiles/FY13-
FULLCOMMITTEE302b.pdf).
---------------------------------------------------------------------------
            An Anti-Health Reform Ideological Agenda
    In light of both the Fund's purpose and track record to 
date, it comes as a great disappointment that Republicans have 
continued to target this program for elimination.\63\ Surely, 
this is not because of Republican assertions about the merits 
of discretionary spending versus mandatory spending or the need 
to protect Congress's prerogative to fund or not to fund health 
programs. Congress, Republicans and Democrats alike, makes 
those kinds of choices--often difficult choices--all of the 
time.\64\ And given traditional bi-partisan support for 
prevention activities, Republican opposition cannot be based on 
the substance of the program.
---------------------------------------------------------------------------
    \63\In addition to passage of H.R. 1217 on Apr. 13, 2011 
(Congressional Record, H2633-2646), House Republicans passed 
legislation (H.R. 3630) to reduce authorized Fund amounts by $11 
billion over 10 years--more than 60% of its funding--as part of the 
payroll extenders legislation (Congressional Record, H8762-8824 (Dec. 
13, 2011)). And despite the threat of a Presidential veto (Executive 
Office of the President, Office of Management and Budget, Statement of 
Administration Policy: H.R. 4628, Interest Rate Reduction Act (Apr. 27, 
2012)), House Republicans also voted to eliminate the Fund as part of 
H.R. 4628 on Apr. 27, 2012, the day this report is scheduled to be 
filed.
    \64\For examples of various federal programs that are supported 
through mandatory spending, see Committee on Energy and Commerce, 
Democratic Staff, The Pitts Proposal to Block Mandatory Funding in the 
Affordable Care Act (Mar. 9, 2011) (online at: http://
democrats.energycommerce.house.gov/sites/default/files/image_uploads/
Fact%20Sheet_03.09.11.pdf).
---------------------------------------------------------------------------
    Pure and simple, Section 102 represents the Republicans' 
unending attack to disrupt, dismantle, and ultimately destroy 
the ACA--even those programs that have been funded and are up 
and running, and even those that make good health policy sense, 
in or out of the health reform law.\65\ What they have not been 
able to achieve whole cloth\66\, Republicans are now attempting 
to do piece by piece. Section 102 puts the Prevention and 
Public Health Fund in the frontline of this ongoing assault.
---------------------------------------------------------------------------
    \65\Efforts in the House of Representatives to repeal or otherwise 
destroy individual parts of the ACA include: H.R. 5, Protecting Access 
to Healthcare Act (passed the House on Mar. 22, 2012 (Congressional 
Record H1453-1490; H1501-1519)); H.R. 1173, Fiscal Responsibility and 
Retirement Security Act of 2011 (passed the House on Feb. 1, 2012 
(Congressional Record H322-354)); H.R. 358, Protect Life Act (passed 
the House on Oct. 13, 2011 (Congressional Record, H6885-6903)); H.R. 
1214, To Repeal Mandatory Funding for School-Based Health Center 
Construction (passed the House on May 4, 2011 (Congressional Record 
H2969-2977)); H.R. 1216, To Convert Funding for Graduate Medical 
Education in Qualified Teaching Centers from Direct Appropriations to 
an Authorization of Appropriations (passed the House on May 25, 2011 
(Congressional Record H3361-3388; H3396-3401; H3430-3434)); and H.R. 
1217, To Repeal the Prevention and Public Health Fund) (passed the 
House on Apr. 13, 2011 (Congressional Record H2633-2647)). To date, 
none of these bills has been considered by the Senate.
    \66\Although the House of Representatives has passed legislation to 
repeal the ACA, that legislation will not become law since the Senate 
has defeated the proposal. (H.R. 2 passed the House of Representatives 
in January 2011 (Congressional Record, H322-323 (Jan. 11, 2011)). The 
Senate defeated a similar proposal a month later. (Congressional Record 
S475 (Feb. 2, 2011)). In any case, President Obama has made clear that 
he will veto any such legislation (Executive Office of the President, 
Office of Management and Budget, Statement of Administration Policy: 
H.R. 2, Repealing the Affordable Care Act (Jan. 6, 2011) (online at 
www.whitehouse.gov/sites/default/files/omb/legislative/sap/112/
saphr2r_20110106.pdf).
---------------------------------------------------------------------------
    In our view, this is not where the Prevention and Public 
Health Fund should be. Rather, is should remain exactly where 
it is at the forefront of helping to realign the nation's 
approach to health and health care, making Americans healthier 
and more productive.

Section 103: Rescinding unobligated balances for CO-OP program

    This provision repeals all unobligated appropriations made 
under section 1322 of the Affordable Care Act, the Federal 
Program to Assist Establishment and Operation of Nonprofit, 
Member-Run, Health Insurance Issuers--also known as the 
Consumer Oriented and Operated Plans, or ``CO-OPs.'' The CO-OP 
program offers low-interest loans to eligible private, 
nonprofit groups to help set up and maintain health plans.\67\ 
Starting on January 1, 2014, CO-OPs will be able to offer 
health plans in the individual and small group insurance 
marketplaces in and outside the exchange.
---------------------------------------------------------------------------
    \67\Terry Gardiner, et. al., Realizing Health Reform's Potential: 
Innovative Strategies to Help Affordable Consumer Operated and Oriented 
Plans (CO-OPs) Compete in New Insurance Marketplaces, (April 2012) (on-
line at http://www.commonwealthfund.org/ /media/Files/
Publicationsassue%20Brief/2012/Apr/1591_Gardiner_innovative 
strategies_help_coops.pdf.
---------------------------------------------------------------------------
    A CO-OP is a nonprofit health insurer that is directed by 
its customers, uses profits for customers' benefit, and is 
designed to offer individuals and small businesses affordable, 
customer-friendly, and high-quality health insurance options. 
Specifically, health cooperatives are governed by their members 
and are focused on coordinating care and coverage for their 
beneficiaries. The most successful examples include 
HealthPartners in Minnesota, with 1.5 million members, and 
Group Health Cooperative in Washington State, with 700,000 
members. Independent studies have placed these cooperatives in 
the ranks of the highest-performing health plans in the country 
in terms of providing value and quality care to their 
customers.\68\
---------------------------------------------------------------------------
    \68\Section 1322 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    CO-OPs may operate locally, state-wide, or in multiple 
states. CO-OPs must be licensed as issuers in each state in 
which they operate and are subject to state laws and 
regulations that apply to all similarly situated issuers.
    When passed, the CO-OP loan program had $6 billion 
available to support loans.\69\ The amounts available were cut 
by $2.2 billion by section 1857 of the Department of Defense 
and Full-Year Continuing Appropriations Act of 2011. This 
amount was further cut in the Consolidated Appropriations Act 
of 2012 by $400 million.
---------------------------------------------------------------------------
    \69\Section 1322 of The Patient Protection and Affordable Care Act, 
Public Law 111-148 and the Health Care and Education Reconciliation Act 
of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    Thus, the CO-OP loan program has a $3.4 billion 
appropriation to support loans. Entities can apply for a start-
up loan that must be repaid in five years or for solvency loans 
that must be repaid, with interest, in 15 years from the date 
of disbursement.
    The first round of applications was due on October 17, 
2011, and to date, a total of ten non-profits offering coverage 
in ten states have been awarded $845 million. These states 
include Maine, Oregon, South Carolina, Iowa, Nebraska, Montana, 
New Jersey, New Mexico, New York, and Wisconsin. A list of the 
awardees is available at: http://www.healthcare.govinews/
factsheets/2012/02/coops02212012a.html.
    A second round of applications was due on January 3, 2012, 
and there will be subsequent quarterly application deadlines 
through December 31, 2012. Awards are announced on a rolling 
basis.

                                TITLE II

    The provisions of title II would cut the Medicaid program 
by more than $24 billion over ten years. These proposals do 
nothing to improve quality or access to care; one section of 
this title would cause more than 300,000 children to lose 
coverage and allow states to cut one-third of the people 
covered by Medicaid and Children's Health Insurance Program 
(CHIP) off the programs. Numerous groups have expressed their 
opposition to these proposals including the National Governor's 
Association, the National Association of Community Health 
Centers, the Association of Community Affiliated Plans, 
American Academy of Pediatrics, the National Rural Health 
Association, Asian and Pacific Islander American Health Forum, 
and Families USA among others.

Section 201. Medicaid provider tax threshold

    This proposal would interfere with states' ability to fund 
Medicaid at a time when states, nearly universally, are 
struggling with budget challenges by limiting the amount of 
state Medicaid funds that can be raised by provider taxes. The 
Congressional Budget Office indicates this proposal would cut 
$11.3 billion in funding out of Medicaid over the next ten 
years. This restriction on states' ability to raise state 
Medicaid funding will result in cuts to Medicaid coverage, 
benefits, or provider payment rates.
    It is important to note that provider taxes are supported 
by states and by providers because states use the money from 
these legitimate and permissible taxes to increase Medicaid 
provider payments, protect quality, and fund critical benefits 
and coverage for millions of Americans.
    The score from the Congressional Budget Office only 
reflects the federal funding cut from the Medicaid program. The 
total funding cut from the program will be significantly 
greater than $11 billion. For a state in which the federal 
government and the state each bear 50% of Medicaid costs to 
achieve $1 in federal savings, total Medicaid expenditures in 
the state would have to fall by $2. To generate $11 billion in 
federal savings, this proposal would require more than $18.9 
billion in cuts to state Medicaid programs.
    Mr. Pallone offered an amendment that would protect state 
provider taxes that are used to fund quality nursing home care. 
Currently, at least 19 states have provider taxes on nursing 
facilities that would be affected by the Republican proposal to 
infringe on states' rights. Those states are Arkansas, 
California, Connecticut, Florida, Georgia, Idaho, Indiana, 
Maine, Maryland, Mississippi, Missouri, Nevada, New York, North 
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, and Vermont.
    This amendment was supported by the American Health Care 
Association (AHCA), which wrote, ``On behalf of the American 
Health Care Association, the nation's largest association 
representing providers of quality long term care, we would like 
to express our support for the 'Protecting State Autonomy to 
Fund Quality Health Care' amendment. . . . It is essential to 
preserve states' ability to utilize this important funding 
mechanism. Your amendment is critical to nursing facilities 
because nearly 65% of our residents rely on Medicaid to pay for 
their care. You are to be commended for your leadership and 
commitment to America's seniors.''\70\
---------------------------------------------------------------------------
    \70\American Health Care Association letter to Congressman Pallone, 
April 24, 2012.
---------------------------------------------------------------------------
    Mr. Pallone's amendment was defeated by a vote of 21-29. 
With Medicaid expected to cover 17 million more Americans by 
2021 as a result of health reform, we should not be making it 
harder for states to provide coverage through Medicaid. But 
that is exactly what this Republican bill would do.

Section 202. Rebasing State DSH allotments for fiscal year 2022

    The Medicaid disproportionate share hospital program (DSH) 
has been critical for America's safety net hospitals. The 
program provides support to hospitals to help cover the cost of 
care to the uninsured and to help make up for Medicaid payment 
shortfalls.
    In the ACA, Congress reduced aggregate Medicaid DSH 
allotments by $0.5 billion in 2014, $0.6 billion in each of 
2015 and 2016, $1.8 billion in 2017, $5 billion in 2018, $5.6 
billion in 2019, and $4 billion in 2020. Congress extended the 
$4 billion reduction for aggregate DSH allotments for one 
additional year--through 2021--in the Middle Class Tax Relief 
and Job Creation Act of 2012.\71\ Section 202 would reduce the 
state disproportionate share hospital allotments to $4 billion 
for 2022. The President's FY 2013 budget proposed to rebase DSH 
allotments for 2021, but not for 2022.
---------------------------------------------------------------------------
    \71\Public Law No. 112-96.
---------------------------------------------------------------------------
    The National Association of Public Hospitals (NAPH), which 
represents the nation's largest metropolitan safety net 
hospitals, reports that without Medicaid DSH and other safety 
net financing payments, its members would have seen a negative 
12% margin in 2009. DSH payments help these facilities make 
ends meet. NAPH writes, ``Drastic cuts to the Medicaid Program 
will only shift the cost burden to states, hospitals and other 
providers, and low-income beneficiaries ultimately hurting 
patients.''\72\
---------------------------------------------------------------------------
    \72\National Association of Public Hospitals and Health Systems 
letter to Chairman Upton and Ranking Member Waxman, April 24, 2012.
---------------------------------------------------------------------------
    The situation that these safety net hospitals will be 
facing ten years in the future is impossible to predict. It is 
irresponsible for Congress to cut payments to these critical 
providers so far into the future. Worse yet, cuts are being 
made for the sole purposes of extended or protecting tax breaks 
for the wealthiest and protecting the defense industry from 
cuts.
    Mr. Engel offered an amendment to strike section 202, 
protecting DSH funding for safety net hospitals in the future. 
This amendment was defeated on a party line vote.

Section 203: Repeal of Medicaid and CHIP maintenance of effort 
        requirements under ACA

    The Affordable Care Act is about shared responsibility 
towards a healthier nation. Individuals, employers, and the 
federal and the state governments share that responsibility. 
The Medicaid and CHIP maintenance of effort is the state's 
responsibility requirement and protects access to healthcare 
for the most vulnerable populations.
    This state responsibility provision requires that states 
not reduce coverage under Medicaid or CHIP through the state 
plan or waiver (until it expires) by implementing new 
eligibility reductions or changes to eligibility methodologies 
or procedures that would have the effect of reducing coverage 
beyond those that were in place at the time of the enactment of 
the Affordable Care Act.\73\ The requirements are in place for 
Medicaid until the Secretary determines that the state 
exchanges are fully operational, which is expected to be 
January 1, 2014.\74\ The requirements are in place for CHIP 
through September 30, 2019.\75\
---------------------------------------------------------------------------
    \73\Section 2001(b) and Section 2101(b) of The Patient Protection 
and Affordable Care Act, Public Law 111-148 and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152.
    \74\Section 2001(b) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
    \75\Section 2101(b) of The Patient Protection and Affordable Care 
Act, Public Law 111-148 and the Health Care and Education 
Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
    The provision reduces spending by $1.4 billion over ten 
years, decreasing the deficit by only $600 million when the 
indirect revenue effects are considered.
            Effect on Coverage
    Section 203 would eliminate these protections for coverage 
and allow states to lower the eligibility standards they 
themselves enacted and cut people off their Medicaid and CHIP 
programs including low-income pregnant women, children, 
seniors, and individuals with disabilities living in their 
homes and in the community upon enactment.
    According to CBO, this will cause at least 100,000 low-
income pregnant women, children, seniors, and individuals with 
disabilities living in their homes and in the community to lose 
insurance in 2013, and cause at least 300,000 children in 
working families to lose insurance coverage in 2015. Becoming 
uninsured has dire consequences. According to the Institute of 
Medicine, uninsured children are 20 to 30% more likely to lack 
immunizations, prescription medications, asthma care, and basic 
dental care and are more likely than insured children to miss 
school due to health problems. Uninsured adults are 25% more 
likely to die prematurely than insured adults overall, and with 
serious conditions such as heart disease, diabetes, or cancer, 
their risk of premature death can be 40% to 50% higher.
    The number of people in jeopardy of losing insurance is far 
greater than CBO's projections of what states might do--one-
third of the Medicaid and CHIP beneficiaries would be at risk 
if this provision passed into law. That includes 14.1 million 
children, 8 million adults, 2.8 million low-income seniors, and 
2.3 million individuals with disabilities according to 
Georgetown University Center for Children and Families.\76\
---------------------------------------------------------------------------
    \76\The Center for Children and Families, Georgetown University 
Health Policy Institute, Eliminating Medicaid and CHIP Stability 
Provisions (MOE): What's at Stake for Children and Families, February 
2011.
---------------------------------------------------------------------------
            Exception in Cases of State Budget Deficits
    States are exempted from these stability requirements for 
nonpregnant, nondisabled adults with incomes above 133% of the 
federal poverty level starting in January 2011 if the state 
certifies that it is experiencing a budget deficit or will 
experience a deficit in the following year.\77\ This exception 
recognizes the difficult budget situations facing a number of 
states.
---------------------------------------------------------------------------
    \77\Section 2001(b) and Section 2101(b) of The Patient Protection 
and Affordable Care Act, Public Law 111-148 and the Health Care and 
Education Reconciliation Act of 2010, Public Law 111-152.
---------------------------------------------------------------------------
            The Maintenance of Effort and Program Integrity
    The maintenance of effort requirements allow states to make 
changes to their enrollment policies and procedures to be 
responsive to loopholes that emerge that subvert Medicaid 
eligibility rules. In a letter to Ranking Member Waxman, former 
CMS Administrator Don Berwick says, ``the MOE provisions do not 
hinder States in their efforts to fight fraud and abuse in the 
Medicaid and CHIP programs.''\78\
---------------------------------------------------------------------------
    \78\Letter from CMS Administrator Don Berwick to Congressman Henry 
Waxman, July 21, 2012.
---------------------------------------------------------------------------
    However, CMS has to be cautious that states are actually 
addressing a documented program integrity issue with any 
proposed changes to eligibility standards. Otherwise a state 
could be erecting a barrier to Medicaid eligibility in 
violation of law.
    According to the Centers for Medicare and Medicaid 
Services, ``[There is extensive evidence that eligibility 
methods and procedures are strong determinants of whether 
eligible individuals can actually gain and retain coverage. Our 
experience working with States suggests States can meet their 
program integrity objectives consistent with the MOE 
provisions.''\79\
---------------------------------------------------------------------------
    \79\Centers for Medicaid, CHIP and Survey and Certification, SMDL# 
11-009, August 5, 2011.
---------------------------------------------------------------------------
            Medicaid and the Economy
    Cutting Medicaid eligibility is not saving money; it is 
abdicating responsibility and shifting costs to beneficiaries 
and providers while undermining the economic recovery. Cutting 
eligibility will undermine all the progress made in the last 
few years and turn back the clock on the money invested in 
covering kids. Children's coverage levels are the highest ever 
due to Medicaid and CHIP where 22 million or 28% of all 
children are covered.
    In addition, every one dollar cut from Medicaid means up to 
$2.76 cut from the state economy.\80\ Loss of federal Medicaid 
dollars means loss of healthcare jobs and healthcare economic 
activity--moving states in exactly the wrong direction from 
economic recovery.
---------------------------------------------------------------------------
    \80\Kaiser Commission on Medicaid and the Uninsured, The Role of 
Medicaid in State Economies: A Look at the Research, (January 2009) 
(on-line at http://www.kff.org/medicaid/upload/7075_02.pdf).
---------------------------------------------------------------------------
            Amendments
    Congresswoman Baldwin offered an amendment to repeal this 
provision citing the number of people, including 300,000 
children, who would lose insurance coverage as a result of this 
provision. Congressman Markey offered an amendment focused on 
the effects of this amendment on disabled children, seniors, 
and widows. Both were defeated on a party line vote.

Section 204: Medicaid payments to territories

    The Territories (American Samoa, Guam, the Northern Mariana 
Islands, Puerto Rico, and the U.S. Virgin Islands) operate 
under different rules for their Medicaid program than the 50 
states and the District of Columbia. The Territories are not 
required to cover the same eligibility groups and use different 
financial standards in determining eligibility compared to the 
states. Medicaid programs in the Territories are also subject 
to annual federal spending caps. All five territories typically 
exhaust their caps prior to the end of the fiscal year. Once 
the cap is reached, the Territories assume the full costs of 
Medicaid services or, in some instances, may suspend services 
or cease payments to providers until the next fiscal year. The 
Territories receive a 55% federal matching rate.
    Section 204 of the Republican proposal would repeal 
paragraph (5) of section 1108(g) of the Social Security Act, 
which provided $6.3 billion in additional Medicaid funding for 
the Territories. Thus far, more than $300 million in additional 
funding has been provided to the Territories for 2011 and 2012 
through this additional funding stream, which is outside of the 
capped allotment.
    The Republican cuts to Medicaid in the Territories would 
make it more difficult for the Territories to support health 
coverage under Medicaid. Already, the Medicaid program in these 
areas is underfunded compared with the need. For example, if 
Puerto Rico's matching rate were calculated according to the 
formula used for the 50 states, its matching rate would be 83%, 
not the 55% in current law. Residents in these areas have much 
less access to private insurance than people in the rest of the 
United States; for example in Puerto Rico, only 42% have 
private insurance, compared to 65.8% in the United States 
overall.\81\
---------------------------------------------------------------------------
    \81\Center on Budget and Policy Priorities, House Bill Would Cut 
Medicaid Funding For Puerto Rico by About $5.5 Billion Through 2020, 
(April 25, 2012).
---------------------------------------------------------------------------
    This funding provided to the Territories through the 
Affordable Care Act would help reduce the federal Medicaid 
funding shortfalls, allowing these areas to better serve low-
income residents' health and long-term care needs. As a result 
of past funding inequalities, the Territories have been unable 
to serve their low income residents to the same extent as 
states on the mainland. For example, Puerto Rico's Medicaid 
income eligibility limit for parents in a family of four is 
effectively just 36% of the poverty line, compared to 63% for 
working parents in the median U.S. state. Puerto Rico covers 
children in families of four up to 71% of the poverty line; 
today, in nearly all states, Medicaid and CHIP cover children 
up to at least 200% of the poverty line.\82\
---------------------------------------------------------------------------
    \82\Id.
---------------------------------------------------------------------------
    Representative Christensen offered an amendment in 
Committee to strike this section of the Republican bill. In a 
letter to Representative Upton dated April 20, she joined the 
other Territorial Representatives in writing, ``As a result of 
chronic underfunding by the federal government, too many 
patients in the territories receive inadequate care, too many 
providers in the territories are not adequately compensates for 
their services, and too much of the financial burden associated 
with health care delivery must be borne by the territorial 
governments themselves.''\83\ Representative Christensen's 
amendment was defeated on a party line vote.
---------------------------------------------------------------------------
    \83\Letter from Representatives Pierluisi, Christensen, Bordallo, 
Faleomavaega to Chairman Upton, April 20, 2012.
---------------------------------------------------------------------------
            Barton Amendment to Repeal the CHIP Performance Bonus 
                    Payments
    In addition to the proposed $24 billion cuts to the 
Medicaid program in the underlying committee print, Congressman 
Barton offered another amendment to rescind $8.3 billion in 
performance bonus payments authorized in the CHIP.
    When the CHIP was reauthorized in 2009, the law included 
special incentive payments--a performance bonus program--to 
encourage states to find and enroll all eligible children.
    These performance bonus payments help offset the costs 
states incur when they enroll lower income children in 
Medicaid. In order to qualify for the bonus payments, states 
have to streamline their enrollment systems by implementing 5 
of 8 enrollment ``best practices,'' and surpass an enrollment 
target for covering children in Medicaid. These best practices 
are things like 12 month continuous eligibility, use of a joint 
application for Medicaid and CHIP, and express lane 
eligibility.
    The number of children with health insurance has climbed 
over the past three years since this program was created in the 
CHIP reauthorization. Prior to the reauthorization, 91% of all 
children had health insurance. By 2011 an additional 1.2 
million children had coverage, bringing children's coverage 
levels to 93%.\84\
---------------------------------------------------------------------------
    \84\ASPE Issue Brief, ``1.2 Million Children Gain Insurance Since 
Reauthorization of Children's Health Insurance Program,'' December 22, 
2011.
---------------------------------------------------------------------------
    States have continued to make significant progress in 
simplifying their programs and covering more children--despite 
the budgetary challenges many states are facing. That is why 
this bonus money is so important. These children that are being 
helped are in the poorest, lowest income families. They are 
children who, without Medicaid coverage, are unlikely to get 
their medical needs met.
    The performance bonus program is set to end in 2013, even 
though CHIP is authorized through 2015. Mr. Barton's amendment 
would eliminate the funding in the successful performance bonus 
program in 2013. Eliminating the program, rather than 
continuing it, will hurt states' efforts to improve children's 
coverage.
    Each year, progress in enrolling eligible but uninsured 
children has increased. Only 10 states received bonuses 
(totaling $37 million) in the first year, 2009. This past year, 
2011, 23 states received a total of $296 million in bonus 
payments.
    Maryland, Virginia, Wisconsin, Colorado and Oregon were the 
top recipients in 2011 of the bonus funding for their success 
in reaching eligible but unenrolled children. This past year, a 
number of states qualified for the bonus payments for the first 
time--Connecticut, Georgia, Montana, North Carolina, North 
Dakota, South Carolina, and Virginia.\85\ States are beginning 
to get the streamlined procedures in place that will help boost 
enrollment of eligible children.
---------------------------------------------------------------------------
    \85\CHIPRA Performance Bonuses: A History (FY 2009-FY2011), (on-
line at www.insurekidsnow.gov)
---------------------------------------------------------------------------
    Mr. Sarbanes offered a second degree amendment to the 
amendment offered by Mr. Barton. This amendment is exactly the 
kind of policy that this Committee would pursue if the 
Republican leadership was interested in making progress in 
reducing the number of uninsured and covering all children to 
give them a healthy start.
    Mr. Sarbanes' amendment would ensure that the Children's 
Health Insurance Program Reauthorization Act (CHIPRA) 
performance bonus program, currently slated to end in 2013, 
could continue through the life of the CHIP program. It would 
ensure that the performance bonus money remains available for 
states that have success in finding and enrolling eligible 
children in health insurance coverage. As a result of efforts 
by Maryland under the performance bonus program, Mr. Sarbanes' 
home state enrolled an additional 41,000 children in Medicaid 
in 2011. Twenty-two other states have received CHIP performance 
bonus payments by simplifying their programs in order to enroll 
more low-income children than projected in Medicaid. Mr. 
Sarbanes' second degree amendment was defeated on a party line 
vote.
            Baldwin Amendment on Medicare Negotiation of Prescription 
                    Drug Prices
    Congresswoman Baldwin's amendment repeals the prohibition 
on the Secretary from negotiating prescription drug prices for 
the seniors in the Medicare program and requires the Secretary 
to negotiate and get the best prices she can on behalf of the 
nearly 50 million people in Medicare. The amendment was ruled 
out of order as being non-germane.

                               TITLE III

    Title III of the Committee Prints\86\ is identical to H.R. 
5, the Help Efficient, Accessible, Low-Cost, Timely Healthcare 
(HEALTH) Act of 2011,\87\ as reported by the Committee on May 
23, 2011.\88\ Like H.R. 5 itself, Title III should not and will 
not become law.\89\ And for good reason. It is one-sided. It 
will not ``fix'' the problems it purports to address. And in 
one-fell swoop, it completely up-ends literally centuries of 
state law. Pure and simple--and contrary to the argument put 
forth by the bill's leading sponsor, H.R. 5/Title III is not 
``meaningful [medical malpractice] reform.''\90\
---------------------------------------------------------------------------
    \86\Hereinafter cited as Title III.
    \87\Hereinafter cited as the HEALTH Act.
    \88\House Committee on Energy and Commerce, HEALTH Act, 112th Cong. 
(May 23, 2011), (H. Rept. 112-39, Part 2).
    \89\A slightly different version of the Health Act passed the House 
of Representatives on Mar. 22, 2012 as part of the Protecting Access to 
Health Care (PATH) Act (Congressional Record, H1517-1519). To date, the 
Senate has not acted on this legislation and is not expected to do so.
    \90\Rep. Phil Gingrey, The HEALTH Act: A Real Reform Option (online 
at: http://gingrey.house.gov/News/DocumentSingle.aspx?DocumentD=240791 
(accessed on May 19, 2011).
---------------------------------------------------------------------------
    This is not to suggest that medical malpractice is not a 
problem in this country. It is. On this point members on all 
sides of the issue agree.\91\ But it is also complex and 
complicated and therefore, deserving of a very thoughtful and 
measured response. H.R. 5/Title III is anything but that.
---------------------------------------------------------------------------
    \91\See, e.g., remarks of Rep. Frank Pallone (p. 12); Rep. Joe 
Pitts (p. 18); and Rep. Michael Burgess (p. 29) during the Committee 
markup of H.R. 5 (House Committee on Energy and Commerce, Markup on 
H.R. 5, HEALTH Act, 112th Cong. (May 10, 2011) (transcript of the 
proceeding) and Ranking Member Henry Waxman (House Committee on Energy 
and Commerce, Markup on HR. 5, HEALTH Act, 112th Cong., p. 21 (May 11, 
2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    Congresses of the past share this belief. Indeed, since the 
107th Congress, legislation identical or similar to H.R. 5/
Title III has repeatedly failed to reach the President's 
desk.\92\ Its failure to become law under Democratic or 
Republican Congresses and Presidents alike is itself a verdict 
on its merits and efficacy.
---------------------------------------------------------------------------
    \92\House Committee on the Judiciary, HEALTH Act, Dissenting Views, 
112th Cong., p. 88 (Mar. 17, 2011) (H. Rept. No. 112-39, Part 1).
---------------------------------------------------------------------------
    We do not believe the case has been made for this House, 
for this Congress, or for this President to follow a different 
course of action. While the current state-based system for 
dealing with medical malpractice is far from perfect, in our 
view, it is the framework through which appropriate 
modifications and improvements should be developed and 
implemented. A ``one-size-fits-all'' approach--the very vision 
of H.R. 5/Title III--not only tears this system down; it also 
imposes upon the states, a new, untried, and untested legal 
structure with little regard for the potential consequences.
    There are many particulars in the legislation and the 
arguments of its advocates to which we object. The views 
expressed here focus only on those specifics that received 
extensive attention during the Committee's consideration of the 
legislation:
           the mis-representation of the California law 
        upon which H.R. 5/Title III is supposedly based;
           H.R. 5/Title III's wholesale preemption of 
        state medical malpractice law;
           its broad and expansive scope that goes 
        beyond traditional medical malpractice; and
           its unparalleled protections for 
        manufacturers of drugs and medical devices approved by 
        the Food and Drug Administration (FDA).
    As such, and in recognition of the thorough and thoughtful 
analysis of all aspects of the legislation by those members of 
the Committee on the Judiciary opposed to the legislation, as 
well as our shared jurisdiction with that committee over H.R. 
5/Title III, we incorporate by reference herein the dissenting 
views included in the report filed by the Committee on the 
Judiciary on H.R. 5.\93\ We concur in those views and stand 
with these colleagues in wholly rejecting this legislation.
---------------------------------------------------------------------------
    \93\House Committee on the Judiciary, HEALTH Act, Dissenting Views, 
112th Cong., pp. 88-120 (Mar. 17, 2011) (H. Rept. No. 112-39, Part 1).
---------------------------------------------------------------------------

Background and Overview

    A medical malpractice claim is an allegation of harm or 
injury caused by a health care provider. A medical malpractice 
lawsuit is a civil (i.e., non-criminal) action in which an 
individual making such an allegation seeks damages against 
those health care providers the individual believes is legally 
responsible or liable for the harm or injury that has occurred. 
Medical malpractice liability arises when a health care 
provider engages in negligence or an intentional 
wrongdoing.\94\ ``The general difference between an action 
based in negligence and one based in intentional tort 
[wrongdoing] is that a `medical procedure poorly performed 
might constitute negligence, while a medical procedure 
correctly performed that was not consented to might constitute 
an intentional tort.'''\95\
---------------------------------------------------------------------------
    \94\See Garner, BA (editor-in-chief), Black's Law Dictionary (9th 
ed. 2009), (``malpractice: medical malpractice'') (available online at: 
http://www.westlaw.com); and Keeton, WP, Dobbs, DB, Keeton, RE, and 
Owen, DG, Prosser and Keeton on Torts (5th ed. 2004), pp. 185-187 (West 
Group, Hornbook Series).
    \95\Congressional Research Service, Medical Malpractice Liability 
Reform: Legal Issues and 50-State Surveys on Tort Reform Proposals, 
Rept. No. R41661, p. 2 (Mar. 28, 2011).
---------------------------------------------------------------------------
    Traditionally, the principals of medical malpractice 
liability and the procedures for the conduct of medical 
malpractice lawsuits have been governed by state law.\96\ In 
fact, it has always been that way.
---------------------------------------------------------------------------
    \96\Id. at Summary.
---------------------------------------------------------------------------
    Periodically, however, Congress has engaged in a debate 
about various aspects of medical malpractice, generally in 
response to sharply rising medical malpractice insurance 
premiums for physicians as well as reports of activities 
strongly associated with such increases--the difficulty of 
doctors in some specialties obtaining any malpractice coverage 
at all and the decision of many physicians to leave the 
practice of medicine altogether because the insurance they 
could secure was too expensive.\97\ Reform the system and 
premium charges will subsequently fall, resulting in good 
things for doctors, for their patients, and for the nation's 
health care bill--so the argument has gone. This flawed logic 
apparently failed to sway past Congresses, which chose not to 
act upon it.
---------------------------------------------------------------------------
    \97\Congressional Research Service, Medical Malpractice: Background 
and Legislation in the 112th Congress, Rept. No. R41693, p. 1 (Apr. 26, 
2011) (report updated Mar. 16, 2012).
---------------------------------------------------------------------------
    Sponsors of the HEALTH Act/Title III have put forth the 
same defective reasoning, stating that H.R. 5/Title III ``will 
. . . bring down the cost of medical malpractice insurance 
which will reduce the overall cost of health care in this 
country,''\98\ and making lower malpractice insurance premiums 
one of the driving forces behind the legislation.\99\ Yet, data 
indicate that today, the overall medical liability insurance 
market is not in crisis.\100\ They also show it is the direct 
regulation of insurance companies--and not a cap on non-
economic damages (one of the core elements of H.R. 5/Title 
III)--that is responsible for the reductions in insurance 
premiums that have been seen.\101\
---------------------------------------------------------------------------
    \98\Remarks of Rep. Phil Gingrey, House Committee on Energy and 
Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., p. 151 (May 11, 
2011) (transcript of the proceeding).
    \99\HEALTH Act, Section (2)(b)(2); Title III, Section 301(b)(2).
    \100\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, p. 
1 (Apr. 26, 2011) (report updated Mar. 16, 2012); Testimony of Joanne 
Doroshow, Executive Director, Center for Justice & Democracy, House 
Committee on Energy and Commerce, Hearing on the Cost of the Medical 
Liability System Proposals for Reform, Including H.R. 5, HEALTH Act, 
112th Cong., p. 25 (Apr. 6, 2011) (transcript of the proceeding).
    \101\This is precisely what happened in the state of California. 
After the state's cap on non-economic damages for medical malpractice 
cases was enacted in 1975 as part of MICRA, malpractice premium rates 
rose by some 450%. They only dropped in 1988 when state Proposition 103 
was passed, setting up a state regulatory process for insurance rates. 
(Testimony of Joanne Doroshow, Executive Director, Center for Justice & 
Democracy, House Committee on Energy and Commerce, Hearing on the Cost 
of the Medical Liability System Proposals for Reform, Including H.R. 5, 
HEALTH Act, 112th Cong., p. 51 (Apr. 6, 2011) (transcript of the 
proceeding)).
---------------------------------------------------------------------------
    Nor is there compelling evidence that H.R. 5/Title III will 
achieve the other major goals articulated by its 
advocates\102\--to eliminate the practice of so-called 
defensive medicine;\103\ to ``put the focus back on 
patients'';\104\ and to significantly reduce health care 
costs.\105\
---------------------------------------------------------------------------
    \102\HEALTH Act, Section (2)(b); Title III, Section 301(b).
    \103\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, pp. 
4-5; 7 (Apr. 26, 2011) (report updated Mar. 16, 2012); Testimony of 
Allen B. Kachalia, MD, JD, Medical Director, Brigham and Women's 
Hospital (p. 34) and Joanne Doroshow, Executive Director, Center for 
Justice & Democracy (p. 70), House Committee on Energy and Commerce, 
Hearing on the Cost of the Medical Liability System Proposals for 
Reform, Including H.R. 5, Health Act, 112th Cong. (Apr. 6, 2011) 
(transcript of the proceeding).
    \104\Rep. Phil Gingrey, The HEALTH Act: A Real Reform Option 
(online at: http://gingrey.house.gov/News/
DocumentSingle.aspx?DocumentID=240791 (accessed on May 19, 2011). See 
Testimony of Allen B. Kachalia, MD, JD, Medical Director, Brigham and 
Women's Hospital, House Committee on Energy and Commerce, Hearing on 
the Cost of the Medical Liability System Proposals for Reform, 
Including H.R. 5, HEALTH Act, 112th Cong., p. 34 (Apr. 6, 2011) 
(transcript of the proceeding). See also the 2009 letter to Senator 
Orrin Hatch from the Congressional Budget Office (CBO) on the effects 
of medical malpractice reform in which CBO stated that ``. . . imposing 
limits on [the right to sue for damages that result from negligent 
health care] might be expected to have a negative impact on health 
outcomes.'' (Letter from Douglas W. Elmendorf, Director, Congressional 
Budget Office to Senator Orrin G. Hatch, p. 5 (Oct. 9, 2009) (online 
at: http://cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort_Reform.pdf)).
    \105\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, pp. 
4-5 (Apr. 26, 2011) (report updated Mar. 16, 2012).
---------------------------------------------------------------------------
    Despite the poor prognosis for success of the approach 
taken by H.R. 5/Title III, and as previously acknowledged, we 
believe medical malpractice is a very real and significant 
concern that requires appropriate attention. Malpractice 
insurance premiums remain high in some parts of the 
country.\106\ The justice system does not always work as it 
should. Many legitimate malpractice cases are never filed and 
when they are, in some instances, severely injured individuals 
do not receive just compensation; in others, damages appear to 
be excessive.\107\ These issues can and should be addressed in 
the proper forum.
---------------------------------------------------------------------------
    \106\See, e.g., Testimony of Troy M. Tippetts, MD, Past President, 
American Association of Neurological Surgeons, House Committee on 
Energy and Commerce, Hearing on the Cost of the Medical Liability 
System Proposals for Reform, Including H.R. 5, HEALTH Act of 2011, 
112th Cong., p. 115-116 (Apr. 6, 2011) (transcript of the proceeding); 
and comments of Rep. Tim Murphy during the Committee markup of H.R. 5 
(Remarks of Rep. Tim Murphy, House Committee on Energy and Commerce, 
Markup on H.R. 5, HEALTH Act, 112th Cong., p. 43 (May 11, 2011) 
(transcript of the proceeding)).
    \107\Testimony of Allen B. Kachalia, MD, JD, Medical Director of 
Quality and Safety, Brigham and Women's Hospital, House Committee on 
Energy and Commerce, Hearing on the Cost of the Medical Liability 
System Proposals for Reform, Including H.R. 5, HEALTH Act, 112th Cong., 
p. 32 (Apr. 6, 2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    But beyond all this lies the root problem of medical 
malpractice--medical errors. As summarized succinctly by 
Congressional Research Service experts, ``medical errors can 
lead to injury, and injury is the medical basis on which a 
malpractice claim is made.''\108\ Such mistakes appear to be at 
an all-time high. For example, a recent study from the leading 
journal Health Affairs indicates that the number of confirmed 
serious, adverse events occurring in hospitalized patients is 
at least ten times higher than previously reported, with such 
events taking place in one-third of hospital admissions.\109\
---------------------------------------------------------------------------
    \108\Congressional Research Service, Medical Malpractice: 
Background and Legislation in the 112th Congress, Rept. No. R41693, p. 
6 (Apr. 26, 2011) (report updated Mar. 16, 2012).
    \109\Classen DC, Resar R, Griffin F, Federico F, Frankel T, Kimmel 
N, Whittington JC, Frankel A, Seger A and James BC, `Global Trigger 
Tool' Shows That Adverse Events in Hospitals May Be Ten Times Greater 
Than Previously Measured, Health Affairs, 30, No. 4 (2011):581-589.
---------------------------------------------------------------------------
    H.R. 5/Title III makes no attempt to address this 
fundamental issue. Shockingly, other than improving the 
exchange of information, reducing medical errors and improving 
patient care is not even listed among the purposes of the 
legislation.\110\ Moreover, proponents of the HEALTH Act/Title 
III specifically rejected an amendment offered at the Committee 
markup on H.R. 5 that would have included the achievement of 
these goals in that section of the bill.\111\
---------------------------------------------------------------------------
    \110\HEALTH Act, Section 2(b); Title III, Section 301(b).
    \111\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 201-207; 229-237 (amendment offered by 
Rep. Ed Towns) (May 11, 2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    This makes no sense given that experts on all sides of the 
malpractice issue agree: We must address medical mismanagement 
as part of any fundamental reform of our health care 
system.\112\
---------------------------------------------------------------------------
    \112\``Reform should address how well the malpractice system 
improves the quality of care that we provide. After all, this is one of 
the system's main goals.'' (Testimony of Allen B. Kachalia, MD, JD, 
Medical Director of Quality and Safety, Brigham and Women's Hospital, 
House Committee on Energy and Commerce, Hearing on the Cost of the 
Medical Liability System Proposals for Reform, Including H.R. 5, HEALTH 
Act, 112th Cong., p. 33 (Apr. 6, 2011) (transcript of the proceeding)).
---------------------------------------------------------------------------
    The ACA\113\ takes on this challenge. It includes several 
provisions designed to improve patient safety and reduce 
unnecessary medical errors.\114\ The Administration has already 
begun to use these authorities to address patient safety in a 
significant fashion.\115\ When fully implemented and evaluated, 
theses types of measures are expected to have a positive impact 
on the medical malpractice situation as it exists today.
---------------------------------------------------------------------------
    \113\The ACA is comprised of two public laws, P.L. 111-148 and P.L. 
111-152.
    \114\See, e.g., ACA Section 2702 (Medicaid payment adjustment for 
health care-acquired conditions); Section 3001 (hospital value-based 
purchasing program); Section 3008 (Medicare payment adjustment for 
conditions acquired in hospitals); Section 3011 (national strategy to 
improve health care quality); Section 3012 (interagency working group 
on health care quality); Section 3013 (quality measure development); 
Section 3014 (quality measurement); Section 3015 (quality data 
collection; public reporting); Section 3021 (Center for Medicare and 
Medicaid Innovation); Section 3025 (hospital readmissions reduction 
program); Section 3026 (community-based care transitions program); 
Section 3501 (health care delivery system research; quality improvement 
technical assistance); Section 3503 (medication management services in 
treatment of chronic disease); and Section 3508 (demonstration program 
to integrate quality improvement and patient safety training into 
clinical education of health professionals).
    \115\For a description of these initiatives, see HHS, Partnership 
for Patients: Better Care, Lower Costs (Dec. 14, 2011) (online at 
http://www.healthcare.gov/news/factsheets/partnership041220112.html).
---------------------------------------------------------------------------
    In the meantime and in recognition of the immediate desire 
to address a number of medical malpractice concerns, the ACA 
also provides $50 million for demonstration projects to allow 
states to develop, implement, and evaluate alternatives to 
current malpractice litigation practices and procedures.\116\ 
HHS is now in the process of implementing such projects. In 
addition, the President's budget proposal for FY 2013 calls for 
$250 million in state medical malpractice demonstration 
projects to be administered by the Department of Justice.\117\ 
This demonstration project approach to malpractice reform has 
also been endorsed by a 2010 study on behalf of the Medicare 
Payment Advisory Commission (MedPAC).\118\
---------------------------------------------------------------------------
    \116\AACA, Section 10607.
    \117\U.S. Department of Justice, FY 2013 Performance Budget, Office 
of Justice Programs (Feb. 2012) (online at: http://www.justice.gov/jmd/
2013justification/pdf/fy13-ojp-justific ation.pdf).
    \118\Mello MM, Kachalia A, Evaluation of Options for Medical 
Malpractice System Reform, MedPAC, No. 10-2 (Apr. 2010).
---------------------------------------------------------------------------
    We believe these efforts, combined with those designed to 
improve patient outcomes, form the basis for real and truly 
meaningful medical malpractice reform that can have a 
substantial impact on health care costs. They should be given 
every opportunity to proceed and succeed. As currently 
structured, H.R. 5/Title III cannot produce the same results. 
In our view, then, once again, the legislation should be turned 
back and put aside.

H.R. 5/Title III is not MICRA

    Since its introduction, proponents of the HEALTH Act/Title 
III have suggested that it is modeled on the Medical Injury 
Compensation Reform Act (MICRA),\119\ medical malpractice 
legislation that was enacted in California in 1975.\120\ At 
best, this is an unintentional misreading of the California 
law; at worse, it is an attempt to mislead members into 
believing that a vote for H.R. 5/Title III is a vote for MICRA. 
As the plain language of H.R. 5/Title III makes clear, this is 
simply not true.
---------------------------------------------------------------------------
    \119\M1CRA is codified at different sections within the California 
Code. See Cal. Business and Professions Code, Section 6146; Cal. Civil 
Code, Sections 3333.1 and 3333.2; and Cal. Code of Civil Procedure, 
Section 667.7.
    \120\See, e.g., Section on Background and Need for Legislation for 
this Committee report (Committee Prints: Proposed Matters for Inclusion 
in Reconciliation Recommendations); Internal Memorandum from Committee 
Staff to Members of the House Committee on Energy and Commerce, Full 
Committee Markup on May 10-11, 2011, p. 5., in which Committee staff 
state: ``H.R. 5 mirrors the provisions of MICRA .   . ''; and comments 
of Rep. Joe Pitts during the Committee markup of H.R. 5. (Remarks of 
Rep. Joe Pitts, House Committee on Energy and Commerce, Markup on H.R. 
5, HEALTH Act, 112th Cong., pp. 18-19 (May 10, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    The differences between MICRA and H.R. 5/Title III on a 
number of key issues are stark and important:

 MICRA applies only to cases involving a doctor, a nurse, or a 
        hospital (and similar health care providers)

    The Health Act/Title III is breathtaking in its scope. Its 
provisions--including caps on noneconomic and punitive 
damages--cover all ``health care lawsuits,'' providing 
protections not only for physicians and hospitals, but also for 
nursing homes, insurance companies, health maintenance 
organizations, medical device manufacturers, and pharmaceutical 
companies.\121\ This approach goes far beyond what is typically 
contemplated as a medical malpractice case.
---------------------------------------------------------------------------
    \121\HEALTH Act, Section 9(9); Title III, Section 308(9).
---------------------------------------------------------------------------

  MICRA applies only to cases of professional negligence and 
        not other causes of action. 

    H.R. 5/Title III takes in all ``health care liability 
actions . . . regardless of the theory of liability'' on which 
a lawsuit is based.\122\ This includes cases of intentional 
wrongdoing--cases in which a patient does not consent to a 
medical or health care service--as well as negligence.
---------------------------------------------------------------------------
    \122\HEALTH Act, Section 9(8); Title III, Section 308(8)
---------------------------------------------------------------------------

  MICRA does not include any limitations on claims brought 
        against pharmaceutical and medical device companies.

    Except in rare instances, the HEALTH Act/Title III provides 
complete immunity from punitive damages to manufacturers of 
drugs and devices that have been approved by the FDA or that 
are generally recognized as being safe and effective in 
accordance with FDA standards.\123\ Such blanket immunity is 
virtually unprecedented.\124\
---------------------------------------------------------------------------
    \123\HEALTH Act, Section 7(c); Title III, Section 306(c).
    \124\Generally speaking, punitive damages cannot be assessed 
against vaccine manufacturers under the National Vaccine Injury 
Compensation Program (established in Title 21 of the Public Health 
Service Act) in those vaccine injury cases in which an injured person 
rejects compensation and elects to file a lawsuit in court. However, as 
discussed in these views on the issue of states' rights, we believe the 
Compensation Program is a unique and special initiative, completely 
distinguishable from the HEALTH Act/Title III.
---------------------------------------------------------------------------

  MICRA does not cap punitive damages or require special action 
        before punitive damages can be awarded.

    H.R. 5/Title III includes a cap on punitive damages--
$250,000 or twice the amount of noneconomic damages, whichever 
is greater.\125\ Moreover, H.R. 5/Title III establishes special 
procedures and conditions that must be met before punitive 
damages can be sought in a lawsuit,\126\ making it far more 
difficult for such damages to be awarded.
---------------------------------------------------------------------------
    \125\HEALTH Act, Section 7(b)(2); Title III, Section 306(b)(2).
    \126\HEALTH Act, Section 7(a); Title III, Section 306(a).
---------------------------------------------------------------------------

  MICRA restricts its limitations on attorney contingency fees 
        only to cases brought against health care providers.

    The HEALTH Act/Title III imposes limits on contingency fees 
for attorneys involved in a much broader spectrum cases, 
including those in which a claim is brought against a 
pharmaceutical or medical device manufacturer.\127\ Such 
limits, in effect, create hurdles for an injured party to 
obtain the best possible legal representation.
---------------------------------------------------------------------------
    \127\HEALTH Act, Section 5; Title III, Section 304.
---------------------------------------------------------------------------
    These dramatic differences between the two pieces of 
legislation--along with others--illustrate just how misguided 
and deceptive it is to assert that H.R. 5/Title III is a MICRA 
look-alike. Moreover, these distinctions highlight the extreme 
nature of H.R. 5/Title III. Indeed, the HEALTH Act/Title III 
not only goes far beyond what is covered and considered by 
MICRA; it is, in fact, a constellation of reforms that when 
taken together in a single package, constitutes a radical 
transformation of the nation's tort system and not simply 
medical malpractice reform. Such transformation is neither 
necessary nor warranted and certainly is not what MICRA stands 
for.

H.R. 5/Title III Is an assault on States' rights

    At its core, H.R. 5/Title III is a wholesale refutation of 
the federalist approach to medical malpractice liability under 
which states have traditionally developed their own law and 
established their own rules to govern these kinds of 
cases.\128\ Every state is affected by the legislation and, 
despite suggestions to the contrary, no state will be able to 
keep its current malpractice law intact.\129\
---------------------------------------------------------------------------
    \128\States have traditionally set their own rules and procedures 
for dealing with other health-related matters, e.g., licensure of 
medical professionals and the regulation of health insurance.
    \129\``I have heard or been briefed that Section 11 [state 
flexibility] of H.R. 5 does protect the states' rights, but if you read 
it, it is extremely restrictive, and most states that have medical 
liability or medical malpractice reform laws will have this federal law 
supersede it. Read Section 11. It is a one size fits all.'' (Remarks of 
Rep. Lee Terry, House Committee on Energy and Commerce, Markup on H.R. 
5, HEALTH Act, 112th Cong., p. 26 (May 10, 2011) (transcript of the 
proceeding)).
---------------------------------------------------------------------------
    Such action is troubling on many fronts. Of greatest 
concern perhaps--beyond the bill's direct and unjustified 
attack on states' rights--is the magnitude of what is 
contemplated under the legislation.
    In one form or another, all 50 states have addressed the 
issue of medical malpractice liability and no two states have 
come out in exactly the same place. Instead, each state has 
developed a process and set of procedures for medical 
malpractice cases that best meet the needs of its citizens and 
own legal system. Thus, for example, some states have enacted 
caps on damages in malpractice cases; other states have laws or 
even constitutional provisions that specifically prohibit them. 
The same can be said for many of the other reforms included in 
the HEALTH Act/Title III such as those related to joint and 
several liability, statutes of limitations, attorney 
contingency fees, and periodic payments for awards.\130\
---------------------------------------------------------------------------
    \130\Congressional Research Service, Medical Malpractice Liability 
Reform: Legal Issues and 50-State Surveys on Tort Reform Proposals, 
Rept. No. R41661 (Mar. 29, 2011).
---------------------------------------------------------------------------
    No state, however, has attempted to capture every action 
against ``a health care provider, a health care organization, 
or the manufacturer, distributor, supplier, marketer, promoter, 
or seller of a medical product, regardless of the theory of 
liability on which the claim is based''\131\ under the umbrella 
of a single medical malpractice reform initiative. No state, 
then--not a single one--has in place the ``new world'' 
malpractice order set out in H.R. 5/Title III.
---------------------------------------------------------------------------
    \131\HEALTH Act, Section 9(7); Title III, Section 308(7).
---------------------------------------------------------------------------
    The sweep of H.R. 5/Title III is simply stunning. In short, 
advocates of the HEALTH Act/Title III would have the federal 
government strike down the medical malpractice law of all 50 
states\132\ and replace it with their own, uniform, first-of-a-
kind version of what that law should be. It comes as no 
surprise, then, that the bipartisan National Conference of 
State Legislatures strongly opposes the legislation and 
concludes that ``federal malpractice legislation is 
unnecessary.''\133\
---------------------------------------------------------------------------
    \132\The HEALTH Act/Title III allows for only two exceptions under 
which state law would not be preempted: (a) state law that provides 
greater procedural or substantive protections for health care providers 
and organizations than those found in the legislation (HEALTH Act, 
Section 11(b)(2)); Title III, Section 310(b)(2)); and (b) state law 
that specifies an exact dollar figure for a cap on either non-economic 
or punitive damage--such figures would remain untouched, regardless of 
their amount (HEALTH Act, Section 11(c); Title III, Section 3120(c)). 
The former demonstrates the one-sided approach of the HEALTH Act/Title 
III--state laws that protect health care providers and organizations 
are preserved while state laws that protect patients and consumers are 
tossed out.
    \133\Letter from Assemblyman William Horne (NV) and Rep. Jerry 
Madden (TX), National Conference of State Legislatures, to Rep. Joe 
Pitts and Rep. Frank Pallone (Apr. 4, 2011) (online at: http://
www.ncsl.org/default.aspx?tabid=22497).
---------------------------------------------------------------------------
    The inconsistency of this vision cannot go unmentioned. By 
and large, proponents of H.R. 5/Title III are the very same 
Committee members who have staunchly spoken out in favor of 
states' rights--at times even with respect to medical 
malpractice law.\134\ Yet, in this instance, they have squarely 
turned their backs on this principle. This reincarnation is 
stunning as well.\135\
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    \134\See, e.g., the debate over the amendment offered by Rep. Tammy 
Baldwin during the Committee markup of both H.R. 5 and Title III. The 
text of that amendment reads: ``Nothing in this Act shall be construed 
to modify or preempt any substantive or procedural state law governing 
medical malpractice or medical liability cases or to impair state 
authority regarding legal standards or procedures used in medical 
malpractice or medical product liability cases.'' This language is 
identical to that found in Section 2(c) of H.R. 816, Provider Shield 
Act of 2011, introduced by Rep. Phil Gingrey, the primary sponsor of 
H.R. 5/Title III, in February 2011. Yet Rep. Gingrey, along with two 
other co-sponsors of H.R. 816, Reps. Tim Murphy and Michael Burgess--as 
well as other proponents of the HEALTH Act/Title III--voted against the 
Baldwin amendment. (House Committee on Energy and Commerce, Markup on 
Committee Prints: Proposed Matters for Inclusion in Reconciliation 
Recommendations, 112 Cong., pp. 218-225; 353-360; Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 6-65 (amendment offered by Rep. Tammy 
Baldwin) (May 11, 2011) (transcript of the proceedings)). These members 
went on to reject a narrower amendment to carve out and preserve only 
state constitutional provisions that address medical malpractice 
liability. (House Committee on Energy and Commerce, Markup on Committee 
Prints: Proposed Matters for Inclusion in Reconciliation 
Recommendations, 112 Cong., pp. 226-235; 360-374; House Committee on 
Energy and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., pp. 66-
88 (amendment offered by Rep. John Barrow) (May 11, 2011) (transcript 
of the proceedings)).
    During the markup on H.R. 5 Rep. Lee Terry emphasized how support 
for H.R. 5 is inconsistent with support for states' rights: ``It seems 
ironic to me that as someone who passionately opposed the 
nationalization of our health care based on the fact that this was 
extreme federalism and usurps states' rights that now, because it is 
politically expedient for us on this side of the aisle, that we are now 
engaging in that same philosophical conduct.'' (Remarks of Rep. Lee 
Terry, House Committee on Energy and Commerce, Markup on H.R. 5, HEALTH 
Act, 112th Cong., p. 26 (May 10, 2011) (transcript of the proceeding)). 
Rep. Terry's point is underscored in an op-ed piece against H.R. 5, 
penned by Professor Randy Barnett of Georgetown University Law Center 
at the very time the Committee report on H.R. 5 was filed. Professor 
Barnett is a well-known and ardent opponent of the ACA who has twice 
this year testified against the law before Congress, co-authored the 
National Federation of Independent Business's amicus brief on the 
constitutionality of the Act for the 11th Circuit Court of Appeals, and 
has appeared with Republicans to promote its repeal. In his op-ed 
piece, Professor Barnett states:

      But tort law--the body of rules by which persons seek 
      damages for injuries to their person and property--has 
      always been regulated by the states, not the federal 
      government. Tort law is at the heart of what is called the 
      `police power' of states. . . . Indeed, if Congress can now 
      regulate tort law, which has always been at the core of 
      state powers, then Congress, and not the states, has a 
      general police power. . . . While I strongly support 
      reforming our malpractice laws to protect honest doctors 
      from false claims and out-of-control state juries, this 
      reform must come at the state level, as it has in recent 
      years. Constitutional law professors have long cynically 
      ridiculed a `fair-weather federalism' that is abandoned 
      whenever it is inconvenient to someone's policy 
      preferences. If House Republicans ignore their pledge to 
      America to assess the Constitution themselves, and invade 
      the powers `reserved for the states' affirmed by the Tenth 
---------------------------------------------------------------------------
      Amendment, they will prove my colleagues right.

    Barnett, R, Tort Reform and the GOP's Fair-Weather Federalism, 
Washington Examiner (May 21, 2011). It is also noteworthy that during 
Committee consideration of H.R. 5, one proponent of the bill pointed to 
the efforts of Mississippi Governor Haley Barbour in enacting a 
``comprehensive tort reform law that has significantly reshaped our 
[Mississippi] medical liability system'' as a model Congress should 
``emulate.'' (Remarks of Rep. Gregg Harper, House Committee on Energy 
and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., p. 47 (May 10, 
2011) (transcript of the proceeding)). Yet Governor Barbour is on 
record before the Committee in opposing federal legislation that would 
preempt state medical malpractice law. (Committee on Energy and 
Commerce, Hearing on the Consequences of Obamacare: Impact on Medicaid 
and State Health Care Reform, 112th Cong., p. 111 (Mar. 1, 2011) 
(transcript of the proceeding)).
    \135\We are compelled to comment as well on the inconsistency 
concerning the assertions of H.R. 5/Title III advocates regarding the 
legislation's constitutional authority. They cite Article I, Section 8, 
Clause 3 of the Constitution as the basis for the legislation, stating 
that ``health-care related lawsuits are activities that affect 
interstate commerce'' and argue that such lawsuits contribute to the 
high costs of health care. (Statement of Rep. Phil Gingrey, 
Congressional Record, H434 (Jan. 24, 2011)). Yet, for the past two 
years, supporters of the HEALTH Act/Title III have argued precisely the 
opposite with respect to the ACA--that its provisions violate the 
Constitution's Commerce Clause even though they too are designed to 
address the high costs of health care.
---------------------------------------------------------------------------
    HEALTH Act/Title III proponents cite two statutes in 
support of their federalist approach to medical malpractice 
reform\136\--the Federal Torts Claim Act (FTCA)\137\ and the 
National Childhood Vaccine Injury Act\138\--as examples of 
congressional intervention in medical malpractice liability. We 
submit that neither law is on point.
---------------------------------------------------------------------------
    \136\See, e.g., the comments of Rep. Brian Bilbray (pp. 23-24); 
Rep. Phil Gingrey (p. 25); and Rep. Bill Cassidy (pp. 31-32) on this 
point during the Committee markup on H.R. 5 (House Committee on Energy 
and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., (May 11, 2011) 
(transcript of the proceeding)).
    \137\United States Code, Title 28, Chapter 171.
    \138\Public Health Service Act, Title 21, Subtitle 2.
---------------------------------------------------------------------------
    Enacted in 1946, the FTCA was established to provide a 
mechanism through which the federal government could be sued 
and held liable for damages in civil or tort actions. (Until 
then, under our traditional common law borrowed from the 
British, the government enjoyed sovereign immunity, meaning 
that it could never be held liable for claims, regardless of 
its degree of culpability.) The FTCA partially waives the 
government's sovereign immunity by authorizing civil suits 
(with some exceptions) to be brought against the United States 
and making federal employees acting within the scope of their 
employment immune from liability--that is, it makes the United 
States liable for torts of its employees to the extent private 
employers are liable under state law for the torts of their 
employees.
    In contrast to the HEALTH Act/Title III, the FTCA does not 
create federal tort law; it simply makes the federal government 
subject to state tort law. The law of the state in which the 
misconduct occurs governs both the substantive and procedural 
aspects of FTCA cases.
    Congress can, however, place limitations on its waiver of 
sovereign immunity. It has, for example, not waived sovereign 
immunity for punitive damages, so no individual can collect 
such damages from the federal government. Under the FTCA 
specifically, Congress has capped attorney fees and requires 
that individuals seeking redress against the federal government 
first file an administrative claim with the appropriate federal 
agency before bringing a lawsuit in federal court. But once 
that lawsuit is initiated, state law will fully apply, 
including state law regarding the award of non-economic 
damages.\139\ Under H.R. 5/Title III, a completely different 
set of rules--those established under the legislation--would be 
used instead.\140\
---------------------------------------------------------------------------
    \139\The following example illustrates how the FTCA interacts with 
state law. A doctor employed by a federally-qualified health center in 
Delaware commits medical malpractice on one of the center's patients. 
Since the doctor is a federal employee, the patient cannot sue either 
the health center or the doctor directly, but can file a claim against 
the federal government under the procedures set forth in the FTCA. 
Under those procedures, the patient must first file an administrative 
claim with HHS. If the patient is not satisfied with the determination 
made by HHS, she may then file a medical malpractice cause of action 
against the government in the U.S. District Court of Delaware. That 
action will be based on Delaware state law which does not cap non-
economic damages.
    \140\See HEALTH Act, Section 9(8); Title III, Section 308(8) which 
defines ``health care liability action'' to include malpractice cases 
brought in federal as well as state court. Moreover, the HEALTH Act/
Title III specifically supersedes provisions of the FTCA related to 
damages, attorney contingency fees, statutes of limitations, and 
periodic payments of awards. (HEALTH Act, Section 11(a); Title III, 
Section 310(a)).
---------------------------------------------------------------------------
    The National Childhood Vaccine Injury Act does not work 
either as a justification for H.R. 5/Title III. Created in 
1986, this statute established a new ``no-fault'' system to 
compensate individuals who have been injured by vaccines 
routinely administered to children. Unlike H.R. 5/Title III, 
the scope of this law is quite narrow and targeted. It was 
enacted to address two very specific and overriding concerns 
with which the federal government has a direct interest: ``(a) 
the inadequacy--from both the perspective of vaccine-injured 
persons as well as vaccine manufacturers--of the [then current] 
approach to compensating those who have been damaged by a 
vaccine; and (b) the instability and unpredictability of the 
childhood vaccine market.''\141\ As discussed in our 
Introduction to these dissenting views, we do not believe 
supporters of H.R. 5/Title III have made the same kind of 
compelling argument to rationalize direct federal intervention 
into the issue of medical malpractice liability. Nor do we 
believe that the legislation is designed to adequately address 
that problem.
---------------------------------------------------------------------------
    \141\House Committee on Energy and Commerce, National Childhood 
Vaccine Injury Act of 1986, 99th Cong., p. 7 (Sept. 26, 1986) (H. Rept. 
99-908, Part 1).
---------------------------------------------------------------------------
    But beyond their differences in purpose and scope is the 
primary substantive distinction between H.R. 5/Title III and 
the vaccine compensation law. Under the National Childhood 
Vaccine Injury Act, injured patients who meet the relevant and 
relatively generous eligibility criteria are awarded 
compensation from a fund supported by a federal tax on 
specified vaccines. Those who are dissatisfied with their 
awards may take their claim to court.
    It is true that such claims are litigated under special 
rules and limitations that, like the HEALTH Act/Title III, 
affect state tort law. But those rules and limitations must be 
understood in the context of the larger National Childhood 
Vaccine Injury Program which, as previously noted, makes 
federally supported compensation--including economic and non-
economic damages--available to injured persons. H.R. 5/Title 
III does not, of course, include a compensation component; it 
merely changes the rules under which compensation can be 
awarded, making it far more difficult for justice to be best 
served. The difference between the two pieces of legislation in 
this regard could not be more profound.
    In sum, H.R. 5/Title III is unprecedented in its approach 
to, and in its reach and impact on, state medical malpractice 
liability law--for no justified end. And there is no relevant 
federal statute which legitimately serves as its prototype. In 
our view, then, this legislation--on these grounds alone--
should be rejected.

H.R. 5/Title III reaches too far and protects too many

    As described in our Background and Overview to these 
dissenting views, medical malpractice typically refers to 
negligent wrongdoing by health professionals, resulting in harm 
to a patient. As we also discussed, H.R. 5/Title III goes well 
beyond this understanding to include all health care liability 
actions involving ``a health care provider, a health care 
organization, or the manufacturer, distributor, supplier, 
marketer, promoter, or seller of a medical product, regardless 
of the theory of liability on which the claim is based.''\142\ 
Such a broad, expansive and sweeping perspective of medical 
malpractice is not to be found in the law books of any of the 
50 states. H.R. 5/Title III simply goes too far.
---------------------------------------------------------------------------
    \142\HEALTH Act, Section 9(7); Title III, Section 308(7).
---------------------------------------------------------------------------
    Three areas that H.R. 5/Title III touches directly received 
considerable attention during the Committee's initial 
deliberations over the legislation:
           the HEALTH Act/Title III's inclusion of 
        intentional torts;
           its protections for nursing homes; and
           the inclusion of lawsuits involving FDA-
        approved drugs and medical devices.
    Here we address the first two issues; the last is discussed 
separately in the section, H.R. 5/Title III Is An Unwarranted 
Windfall for Pharmaceutical and Medical Device Companies.

Intentional harms

    In the context of medical malpractice, an intentional tort 
or wrongdoing occurs when a patient does not consent to a 
procedure or service--even if it is performed or provided 
correctly. In such cases, the health care provider is 
``generally alleged to have intentionally acted in a fashion 
that ultimately caused harm to the patient.''\143\ Intentional 
torts include claims such as assault, sexual assault and rape, 
battery, false imprisonment (unlawfully holding someone against 
her or his will), invasion of privacy, conversion (theft), 
misrepresentation, and fraud.\144\
---------------------------------------------------------------------------
    \143\Congressional Research Service, Medical Malpractice Liability 
Reform: Legal Issues and 50-State Surveys on Tort Reform Proposals, 
Rept. No. R41661, p. 2 (Mar. 28, 2011).
    \144\See Garner, BA (editor-in-chief), Black's Law Dictionary (9th 
ed. 2009) (``battery: tort''); (``tort: intentional tort'') (available 
online at: http://www.westlaw.com); and Keeton, WP, Dobbs, DB, Keeton, 
RE, and Owen, DG, Prosser and Keeton on Torts (5th ed. 2004), pp. 33-54 
(West Group, Hornbook Series).
---------------------------------------------------------------------------
    Except in those instances in which a claim is based upon 
criminal liability,\145\ the HEALTH Act/Title III affords its 
liability protections to those who have committed these and 
similar kinds of acts, including conduct that results in 
egregious injury or even death to patients. Nothing in the 
Committee's deliberations over H.R. 5/Title III--not a shred of 
testimony presented at the Health Subcommittee hearing or any 
point of debate made during the Committee markup of either H.R. 
5 or Title III--documents or justifies this position. This is 
yet another example of how extreme H.R. 5/Title III is in its 
approach to medical malpractice reform.
---------------------------------------------------------------------------
    \145\HEALTH Act, Section 9(7); Title III, Section 308(7).
---------------------------------------------------------------------------
    Consider these real world examples:
     Dr. Ben D. Ramaley, a Connecticut obstetrician/
gynecologist, substituted his own sperm for that of a patient's 
husband during an artificial insemination procedure. The couple 
went on to have a set of twins, only to learn after their birth 
and a subsequent paternity test that the treating physician 
(and not the husband) was the biological father. The state's 
Department of Public Health fined the doctor $10,000 for 
``using the wrong man's sperm'' in the procedure, but allowed 
him to keep an unrestricted license to practice medicine. The 
couple's medical malpractice lawsuit against the physician was 
settled, but there is no record of Dr. Ramaley's ever facing 
criminal charges.\146\
---------------------------------------------------------------------------
    \146\Greenwich Times, Doctor Uses Wrong Man's Sperm to Produce 
Twins (Nov. 12, 2009) (online at: http://www.ctpost.com/default/
article/Doctor-uses-wrong-man-s-sperm-to-produce-twins-215345.php).
---------------------------------------------------------------------------
     Dr. Kermit Gosnell, a Pennsylvania physician, 
performed late term abortions on minority and low-income 
women--many of whom were pregnant for the first time--without 
informing the mothers he was doing so. He falsified ultrasounds 
used to determine the duration of the pregnancy and taught his 
staff to hold the probe in such a way that the fetuses looked 
smaller. Few, if any, of the women who were sedated during the 
procedure knew that their babies had been delivered alive. And 
because they were misled about the length of their pregnancies, 
none of them was given the opportunity to make an informed 
choice about what to do about their pregnancy. Dr. Gosnell is 
now facing criminal charges, but has not yet been found guilty 
of any crime. At least 46 lawsuits have been filed against him 
in the past.\147\
---------------------------------------------------------------------------
    \147\MSNBC, `House of Horrors' Alleged at Abortion Clinic (Jan. 19, 
2011) (online at: http:www.msnbc.msn.com/id41154527/ns/us_news-
crime_and_courts/t/house-horrors-alleged-abortion-clinic/); ABC News, 
Alleged Victim Calls Philadelphia Abortion Doc Kermit Gosnell a 
`Monster' (Jan. 25, 2011) (online at: http://abcnews.go.com/US/alleged-
victim-calls-philadelphia-abortion-doctor-kermit-gosnell/
story?id=12731387).
---------------------------------------------------------------------------
     Mildred Taylor, who suffered from Alzheimer's 
disease, but was otherwise healthy, was a resident at the 
Prestige Assisted Living facility in Marysville, California. On 
June 24, 2004, the wheelchair-bound, 98-year old was falsely 
imprisoned when she was left outside overnight by facility 
staff. No one made any attempt to find her, even though staff 
knew she was not in her room. No one called Ms. Taylor's family 
and no one contacted the police to report her missing. She was 
not found until the next morning when her body temperature had 
dropped to 93 degrees and her right leg had become severely 
swollen. Ms. Taylor remained bed-ridden and debilitated until 
her death less than one month later. The California Department 
of Social Services cited Prestige for violating Ms. Taylor's 
rights, but did not even fine the company.\148\
---------------------------------------------------------------------------
    \148\Appeal Democrat, Suit Filed in Death of Patient (June 9, 2005) 
(online at: http://www.appeal-democrat. com/news/prestige-15049-taylor-
lawsuit.html).
---------------------------------------------------------------------------
    In each of these cases, a ``health good or service''--as 
that term is defined in H.R. 5/Title III\149\--was provided, 
arguably bringing them within the purview of the legislation. 
In the instance of Mildred Taylor, we think our position is 
made even stronger by the comments found in the majority views 
of the Committee report on H.R. 5 that the term ``health care 
goods and services'' is intended to include those ``involving 
the assessment or care of the health of human beings'' as well 
as the ``monitoring, supervision, and provision of direct 
assistance to claimants.''\150\
---------------------------------------------------------------------------
    \149\HEALTH Act, Section 9(12); Title III, Section 308(12).
    \150\House Committee on Energy and Commerce, HEALTH Act, 112th 
Cong., p. 28 (H. Rept. 112-39, Part 2).
---------------------------------------------------------------------------
    Supporters of the HEALTH Act/Title III point to the 
legislation's exclusion of actions constituting criminal 
liability as the basis for arguing that examples such as these 
and those discussed during the Committee markup on H.R. 5\151\ 
would fall outside the reach of H.R. 5/Title III. But 
intentional tort is not the same as criminal liability. In 
criminal cases, individuals must be selected for prosecution, 
tried in a court of law, and successfully convicted using a 
standard of proof that is appropriately high--proof beyond a 
reasonable doubt. In contrast, many incidents of intentional 
tort--even if they meet the elements of a crime--are never 
reported, let alone prosecuted.\152\ Indeed, Dr. Ramaley does 
not appear to ever have faced criminal charges; Dr. Gosnell has 
not yet been convicted of anything.\153\ And it is unclear how 
an entity such as a nursing home could be charged with a crime 
in case like Mildred Taylor's. We submit that under H.R. 5/
Title III, these health care providers could escape significant 
civil liability as wel1.\154\
---------------------------------------------------------------------------
    \151\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 103-106 (May 11, 2011) (transcript of the 
proceeding).
    \152\This is especially true with regard to sexual assaults. See 
U.S. Department of Justice, Bureau of Justice Statistics, Rape and 
Sexual Assault: Reporting to the Police and Medical Attention, 1992-
2000 (Aug. 2002) (online at: http://bjs.ojp.usdoj.gov/content/pub/pdf/
rsarp00.pdf).
    \153\NBC 10 Philadelphia, Gosnell in Court on Drug Charges (Apr. 
26, 2012) (online at www.nbcphiladelphia.com/news/local/Gosnell-Pill-
Mill-Abortion-Doctor-149141535.html).
    \154\This argument made by H.R. 5/Title III advocates is undercut 
further by the very language of the legislation which lists among the 
factors to be considered in determining punitive damages ``any criminal 
penalties imposed on [a party] as a result of the conduct complained of 
. . .'' (HEALTH Act, Section 7(b)(1)(E); Title III, Section 
306((b)(1)(E)). If criminal acts are outside the scope of H.R. 5/Title 
III, how can such acts be taken into account in determining punitive 
damages under the legislation?
---------------------------------------------------------------------------
    Advocates of H.R. 5/Title III also maintain that even in 
the absence of criminal activity, cases like these are not 
protected under the legislation because they are extreme and 
non-therapeutic in nature and thus do not meet the definition 
of a health care good or service.\155\ We struggle to find text 
in the legislation that supports this argument. At the very 
least, the language is ambiguous on the point. Regardless, 
there is no bright line here. Consider, for example, the 
situation in which a psychiatrist has consensual sex with a 
patient because he believes--and convinces the patient--that 
this is the best way to ``treat'' her emotional problems. Do 
the protections of H.R. 5/Title III apply in any subsequent 
malpractice lawsuit brought by the patient? Again, based upon 
the text of the legislation, we believe the answer is unclear 
at best.
---------------------------------------------------------------------------
    \155\House Committee on Energy and Commerce, Markup of H.R. 5, 
HEALTH Act, 112th Cong., pp. 196-199 (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    Supporters of the HEALTH Act/Title III argue further that 
the availability of punitive damages in cases in which 
``malicious intent to injure''\156\ occur should address any 
concerns we have about the inclusion of intentional torts in 
this legislation because, in their view, such actions are de 
facto, ones of this character.\157\ We are not comforted at all 
by this assertion; indeed, we believe it is Orwellian.
---------------------------------------------------------------------------
    \156\HEALTH Act, Section 7(a); Title III, Section 306(a).
    \157\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 193-194 (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    The purpose of the provisions of H.R. 5/Title III on 
punitive damages is to limit them or cut them out altogether. 
Although ``malicious intent to injure'' is one ground upon 
which an injured person may seek punitive damages, the punitive 
damages procedural hurdles\158\ and monetary limits in the 
bill--$250,000 or two times the amount of economic damages 
awarded\159\--still apply. Moreover, this argument ignores 
other features of the legislation that may adversely affect an 
individual who has experienced an intentional tort and seeks 
compensation for the wrong that has occurred.\160\ In sum, we 
believe it is unconscionable for the federal government to 
place these kinds of restrictions on anyone--such as those 
individuals described in the cases above--who have been injured 
as a result of an intentional tort.
---------------------------------------------------------------------------
    \158\HEALTH Act, Section 7(a); Title III, Section 306(a).
    \159\HEALTH Act Section 7(b)(2); Title III, Section 306(b)(2).
    \160\Such an example is the elimination of the legal standard of 
joint and several liability which allows injured persons to sue all 
responsible parties and recover from each one in proportion to the 
degree of fault, or to sue any one party and recover the entire amount 
of damages. (HEALTH Act, Section 4(d); Title III, Section 303(d)).
---------------------------------------------------------------------------
    We find these provisions of the legislation particularly 
troublesome because during the debate over the issue of 
intentional torts during the markup of H.R. 5, there appeared 
to be consensus among the members who participated that these 
activities are not the stuff of traditional medical malpractice 
cases. And so it was especially disappointing that an amendment 
to clarify and resolve the matter was not adopted. Under that 
amendment, intentional torts would be removed from the scope of 
the bill.\161\ Much to our amazement and consternation, the 
amendment was resoundly defeated, keeping intact liability 
protections for actions that--regardless of one's position on 
medical malpractice reform--never should have been a part of 
the HEALTH Act/Title III in the first place.
---------------------------------------------------------------------------
    \161\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 190-200; 222-229 (amendment offered by 
Ranking Member Henry Waxman) (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------

Nursing homes and other health care entities

    H.R. 5/Title III covers lawsuits brought against not only 
providers such as physicians or hospitals--the typical medical 
malpractice situation--but also cases involving ``health care 
organizations,'' including nursing homes, health maintenance 
organizations (HMOs), and health insurance companies.\162\ As 
such, these entities are entitled to the liability protections 
afforded under the bill, including the caps on non-economic and 
punitive damages.
---------------------------------------------------------------------------
    \162\HEALTH Act, Sections 9(7) and 9(10); Title III, Section 308(7) 
and 308(10).
---------------------------------------------------------------------------
    We have found no credible evidence to support the inclusion 
of these entities within the range of the HEALTH Act/Title III. 
Nursing homes, HMOs, and insurance companies were not even 
discussed during the Health Subcommittee hearing on the 
legislation. And the debate in the Committee markup on H.R. 5 
did nothing to persuade us to see the need to include these 
organizations within the realm of ``medical malpractice 
reform.''
    In fact, our concern over the inclusion of these businesses 
in H.R. 5/Title III has only grown. This is especially true 
with respect to nursing homes which continue to be the subject 
of countless cases of negligence and even intentional 
wrongdoing. According to a Government Accountability Office 
(GAO) report on this topic, the proportion of nursing homes 
with serious quality problems remains unacceptably high, 
despite a decline in the incidence of such reported problems. 
Actual harm or more serious deficiencies were cited for 20% or 
some 3500 nursing homes during an 18-month period.\163\ A more 
recent GAO report concludes that serious care problems in 
nursing homes continue to be of concern.\164\ These findings 
were reinforced by the several examples provided during the 
debate over this issue in the Committee markup on H.R. 5.\165\
---------------------------------------------------------------------------
    \163\GAO, Nursing Home Quality: Prevalence of Serious Problems, 
While Declining, Reinforces Importance of Enhanced Oversight, pp. 3-4, 
GA0-03-561 (July 2003).
    \164\GAO, High-Risk Series: An Update, p. 159, GA0-11-278 (Feb. 
2011).
    \165\House Committee on Energy and Commerce, Markup on H.R. 5, 
HEALTH Act, 112th Cong., pp. 103-105 (May 11, 2011) (transcript of the 
proceeding).
---------------------------------------------------------------------------
    Supporters of the legislation contend that liability 
protections are necessary for nursing homes to decrease their 
liability costs and increase access to liability insurance 
coverage.\166\ But a 2010 study conducted by the same firm 
whose work was cited in support of this argument during the 
Committee markup of H.R. 5 suggests that these issues have been 
largely resolved. In fact, according to this study, the average 
annual loss (i.e., expenses related to liability insurance 
claims) per nursing home bed decreased from $1,710 in 2001 to 
$1,270 in 2009.\167\ And an article in Insurance Journal on the 
study concluded that ``liability insurance pricing and 
availability for long term care providers are good and getting 
better'' and attributed this trend to a new-found emphasis on 
quality of care.\168\
---------------------------------------------------------------------------
    \166\See, e.g., the comments of Rep. Pete Olson during the markup 
of H.R. 5 on this point. (Remarks of Rep. Pete Olson, House Committee 
on Energy and Commerce, Markup of H.R.. 5, HEALTH Act, 112th Cong., pp. 
106-108; 110-113 (May 11, 2011) (transcript of the proceeding)).
    \167\Aon Risk Solutions, 2010 Long Term Care General Liability and 
Professional Liability Actuarial Analysis (Aug. 2010) (online at: 
http://img.en25.com/Web/A0N/LTC%20Benchmark%20Study_2010_FINAL.pdf).
    \168\Insurance Journal, Growth, Stability and Changes in Store for 
Long Term Care Market (Nov. 14, 2010) (online at: http://
www.insurancejournal.com/magazines/mag-features/2010/11/14/160493.htm).
---------------------------------------------------------------------------
    With regard to the impact of tort reform on these promising 
results, study documents observe that ``while long term care 
liability costs are stable across much of the nation, Arkansas, 
Tennessee, and West Virginia are experiencing high expenses--
known as loss costs--related to insurance claims.''\169\ In the 
context of the HEALTH Act/Title III, it is worth noting that 
two of these states--Arkansas and West Virginia--have both 
enacted some form of tort reform;\170\ yet, according to this 
study, the insurance market in these states remains turbulent. 
This suggests that such reform is not the cure-all advocates of 
H.R. 5/Title III would have us believe.
---------------------------------------------------------------------------
    \169\Aon Risk Solutions, Highest Long Term Care Liability Costs in 
Arkansas, Tennessee and West Virginia: Aon Study Costs Across the Rest 
of the Nation Remain Stable (Aug. 5, 2010) (online at: http://
ir.aon.com/phoenix.zhtml?c=105697&p;=irol-
newsArticle&ID;=1457169&highlight;=).
    \170\Insurance Journal, Growth, Stability and Changes in Store for 
Long Term Care Market (Nov. 14, 2010) (online at: http://
www.insurancejournal.com/magazines/mag-features/2010/11/14/
160493.htm)).
---------------------------------------------------------------------------
    Thus, we remain unconvinced that nursing homes (or any 
other health care organization)\171\ should receive the 
unprecedented protections provided to them under the HEALTH 
Act/Title III. In this respect, too, the legislation is 
unnecessarily and inappropriately broad in its scope and 
therefore, should be rejected.
---------------------------------------------------------------------------
    \171\Physician groups supporting H.R. 5/Title III have in the past 
argued fervently in favor of ensuring that HMOs are held fully 
accountable for injuries that occur to their patients. (See, e.g., the 
position of the American Medical Association on this issue. (American 
Medical News, Both Sides Ready for HMO Liability Fight (Feb. 2004) (on 
line at: http://www.ama-assn.org/amednews/2004/02/16/gvsb0216.htm)). 
Their endorsement of the legislation would appear to undercut that 
concern.
---------------------------------------------------------------------------

H.R. 5/Title III is an unwarranted windfall for pharmaceutical and 
        medical device companies

    H.R. 5/Title III sweeps so-called ``medical products,'' or 
FDA-approved drugs, biologics, and devices into its overly 
broad span. Lawsuits involving drugs and medical devices are 
not the kind of cases that are traditionally considered medical 
malpractice cases, which are ostensibly the subject of the 
legislation. A typical ``medical malpractice'' lawsuit is one 
filed by an injured patient against his or her treating 
physician. In contrast, cases involving medical products are 
filed by patients who are injured--and often killed--by 
defective drugs and medical devices against large, extremely 
well-resourced pharmaceutical or medical device companies.\172\
---------------------------------------------------------------------------
    \172\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including H.R. 5, HEALTH Act, 
112th Cong., p. 5 (Apr. 6, 2011).
---------------------------------------------------------------------------
    The primary rationales advanced by supporters of the 
legislation\173\ simply do not apply to lawsuits relating to 
FDA-approved drugs and medical devices. For instance, 
proponents of the HEALTH Act/Title III argue that it is 
necessary to curtail the practice of defensive medicine.\174\ 
They claim the legislation will bring down the cost of medical 
malpractice insurance\175\ and also fix doctor shortages caused 
by liability exposure.\176\
---------------------------------------------------------------------------
    \173\As discussed in the Background and Overview section of these 
dissenting views, we do not believe H.R. 5/Title III will achieve any 
of the primary goals set forth by its supporters.
    \174\See, e.g., the comments of Rep. Joe Pitts during the Committee 
markup of H.R. 5. (Remarks of Rep. Joe Pitts, House Committee on Energy 
and Commerce, Markup on H.R. 5, HEALTH Act, 112th Cong., p. 18 (May 9, 
2011) (transcript of the proceeding)).
    \175\See, e.g., the comments of Rep. Phil Gingrey during the 
Committee markup of H.R. 5. (Remarks of Rep. Phil Gingrey, House 
Committee on Energy and Commerce, Markup on H.R. 5, HEALTH Act, 112th 
Cong., p. 151 (May 10, 2011) (transcript of the proceeding)).
    \176\See, e.g., comments of Rep. Olson (pp. 214-215; 225) and Rep. 
Gingrey (p. 221) during the markup of Title III (House Committee on 
Energy and Commerce, Markup on Committee Prints: Proposed Matters for 
Inclusion in Reconciliation Recommendations, 112 Cong.) and comments of 
Rep. Tim Murphy during the Health Subcommittee hearing on H.R. 5. 
(House Committee on Energy and Commerce, Subcommittee on Health, 
Hearing on The Cost of Medical Liability System Proposals for Reform, 
Including H.R. 5, HEALTH Act, 112th Cong., pp. 101; 104 (Apr. 6, 2011). 
(transcript of the proceedings).
---------------------------------------------------------------------------
    Absolutely no justification has been asserted during the 
Committee's deliberations on the legislation for H.R. 5/Title 
III's inclusion of medical products. On the contrary, there was 
much debate about the danger and inappropriateness of covering 
drugs and devices, particularly during the testimony of 
Professor Brian Wolfman at the Health Subcommittee's hearing on 
H.R. 5.\177\
---------------------------------------------------------------------------
    \177\House Committee on Energy and Commerce, Subcommittee on 
Health, Hearing on The Cost of Medical Liability System Proposals for 
Reform, Including H.R. 5, HEALTH Act, 112th Cong., pp. 51-52; 104-107; 
117-121 (Apr. 6, 2011) (transcript of the proceeding).
---------------------------------------------------------------------------
    In our view, the HEALTH Act/Title III will have an 
especially devastating impact on patients injured by defective 
or inadequately labeled drugs and devices. For instance, in 
addition to failing to fully compensate victims of dangerous 
drugs and devices for their non-economic damages, H.R. 5/Title 
III's $250,000 cap on non-economic damages would make it very 
difficult for these individuals to retain competent counsel who 
would be willing to take on the typical large, and well endowed 
pharmaceutical or medical device company.\178\ Most individuals 
who are injured by these products cannot begin to pay for the 
out-of-pocket expenses necessary to finance a potentially 
massive lawsuit against a drug or device manufacturer.\179\ 
Instead, they rely upon a contingency system in which an 
attorney is willing to represent them in exchange for a certain 
percentage of any final recovery in the case.\180\ Particularly 
in cases that are complex and difficult or include very well-
financed defendants, a limit of $250,000 in non-economic 
damages would be insufficient to enable most attorneys to 
afford the protracted litigation process such cases 
involve.\181\
---------------------------------------------------------------------------
    \178\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including H.R. 5, HEALTH Act, 
112th Cong., p. 5 (Apr. 6, 2011).
    \179\Id.
    \180\Id.
    \181\Id.
---------------------------------------------------------------------------
    In his testimony at the Health Subcommittee hearing on H.R. 
5, Professor Wolfman provided a disturbing illustration of this 
concern.\182\ He described a conversation he had with the 
attorney who represented Diana Levine, the injured party 
(plaintiff) in the 2009 U.S. Supreme Court case, Wyeth v. 
Levine.\183\ Ms. Levine brought a lawsuit against Wyeth, one of 
the country's largest pharmaceutical companies, having lost her 
arm by amputation after receiving an inadequately labeled Wyeth 
drug.\184\ After years of litigation, Ms. Levine's case was 
eventually heard by the Supreme Court, which affirmed that 
persons injured by an inadequately labeled FDA-approved drug 
can sue the manufacturer of that product.\185\
---------------------------------------------------------------------------
    \182\Id. at 12.
    \183\Wyeth v. Levine, 129 S.Ct. 1187 (2009).
    \184\Id.
    \185\Id.
---------------------------------------------------------------------------
    Subsequent to the Court's decision, Professor Wolfman spoke 
with Ms. Levine's lawyer. Professor Wolfman asked the attorney 
if he would have taken the Levine case if there had been a 
$250,000 limit on non-economic damages; after a long pause, the 
attorney hesitantly responded ``no.''\186\ Unquestionably, 
then, had the provisions of H.R. 5/Title III been in place 
during the litigation, Ms. Levine might well have lost out in 
securing the stellar and long-term representation she was able 
to obtain under current law. Thus, as the Levine case clearly 
demonstrates, the adverse effects of the kinds of caps found in 
the HEALTH Act/Title III go beyond simply imposing an 
artificial dollar amount on damages.
---------------------------------------------------------------------------
    \186\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including HR. 5, HEALTH Act, 
112th Cong., p. 12 (Apr. 6, 2011).
---------------------------------------------------------------------------
    The limits H.R. 5/Title III puts on attorney contingency 
fees would only exacerbate this problem. With draconian caps on 
the amount that an attorney could collect through his or her 
contingency contracts in place, most plaintiffs' attorneys 
would be financially unable to take on complex product 
liability cases involving drugs and devices.\187\ Mr. Wolfman's 
testimony about his conversation with the attorney in the 
Levine case underscores this point as well.
---------------------------------------------------------------------------
    \187\Id. at 19.
---------------------------------------------------------------------------
    As introduced, H.R. 5 would also abolish punitive damages 
in cases pertaining to FDA-approved drugs and devices, except 
in the most limited circumstances.\188\ Specifically, H.R. 5 
would prohibit punitive damages in cases in which a drug or 
device either received FDA approval or is ``generally 
recognized among qualified experts as safe and 
effective.''\189\
---------------------------------------------------------------------------
    \188\Under Section 7(c)(4) of the HEALTH Act, punitive damages may 
be awarded in such cases only when a person: (a) before or after 
premarket approval, clearance, or licensure of the medical product at 
issue, knowingly misrepresented to or withheld from the FDA information 
that is required to be submitted under the Federal Food, Drug, and 
Cosmetic Act or section 351 of the Public Health Service Act 
(regulation of biological products) that is material and is causally 
related to the harm which the injured party allegedly suffered; or (b) 
made an illegal payment to an official of the FDA for the purpose of 
either securing or maintaining approval, clearance, or licensure of 
such medical product.
    \189\H.R. 5, Section 7(c)(1)(A)(ii); Title III, Section 
306(c)(1)(A)(ii).
---------------------------------------------------------------------------
    Because much information is gained about the safety and 
effectiveness of drugs and devices after they are on the market 
and in use by a broad population of people, it is misguided to 
tie the availability of punitive damages to these products' 
initial FDA approval. Indeed, most product liability lawsuits 
regarding drug safety relate to information that was not 
presented to the FDA at the time of the drug's approval.\190\ 
But under the HEALTH Act/Title III, even a manufacturer that 
fails to exercise due diligence and investigate reports of a 
safety problem could be immunized from punitive damages.
---------------------------------------------------------------------------
    \190\Testimony of Brian Wolfman, JD, Visiting Professor of Law, 
Georgetown University Law Center, House Committee on Energy and 
Commerce, Subcommittee on Health, Hearing on The Cost of Medical 
Liability System Proposals for Reform, Including HR. 5, HEALTH Act, 
112th Cong., p. 20 (Apr. 6, 2011).
---------------------------------------------------------------------------
    Although an amendment was adopted during the Committee 
markup of H.R. 5 that would permit an award of punitive damages 
in cases in which the defendant caused the drug or device to be 
misbranded or adulterated,\191\ H.R. 5/Title III would still 
have the effect of severely restricting the availability of 
punitive damages in lawsuits involving medical products.
---------------------------------------------------------------------------
    \191\House Committee on Energy and Commerce, Markup of HR. 5, 
HEALTH Act, 112th Cong., pp. 162-164 (amendment offered by Rep. John 
Dingell) (May 11, 2011) (transcript of the proceeding). That amendment 
is included in Title III as Section 306(c)(4)(C).
---------------------------------------------------------------------------
    Punitive damages have a unique and specific function: They 
serve to punish exceptionally outrageous, deliberate, or 
harmful misconduct, and to deter both the wrongdoer and others 
from engaging in similar misconduct in the future.\192\ By 
severely limiting punitive damages in drug and device cases, 
H.R. 5/Title III places all of us in danger because in effect, 
it removes the most potent and effective means of deterring bad 
actors. There is simply no justification for this drastic 
action.
---------------------------------------------------------------------------
    \192\Testimony of Joanne Doroshow, Executive Director, Center for 
Justice & Democracy, House Committee on Energy and Commerce, 
Subcommittee on Health, Hearing on The Cost of Medical Liability System 
Proposals for Reform, Including HR. 5, HEALTH Act, 112th Cong., p. 32 
(Apr. 6, 2011).
---------------------------------------------------------------------------
    This is especially true in light of FDA's recognition of 
the valuable role state-based litigation plays in complementing 
the agency's regulation of drugs and medical devices.\193\ FDA 
is on record in finding that drug and device lawsuits help to 
uncover post-market safety risks that are unknown to the agency 
at the time of approval. Indeed, as a former FDA chief counsel 
has stated: ``FDA regulation of a device cannot anticipate and 
protect against all safety risks to individual consumers. Even 
the most thorough regulation of a product such as an important 
medical device may fail to identify potential problems 
presented by the product. Regulation cannot protect against all 
possible injuries that might result over time.''\194\
---------------------------------------------------------------------------
    \193\Kessler, D and Vladeck D, A Critical Examination of the FDA's 
Efforts to Preempt Failure-to-Warn Claims, Georgetown Law Journal, 
96:461, 463 (Jan. 2008) (online at: http://
www.georgetownlawjournal.org/issues/pdf/96-2/Kessler&Vladeck.PDF;).
    \194\Porter, MJ, The Lohr Decision: FDA Perspective and Position, 
Food & Drug Law Journal, 52:7, 11 (Jan. 1997).
---------------------------------------------------------------------------
    Drug and medical device manufacturers will always be better 
positioned and better equipped than the FDA to know the safety 
profile of their products, since they develop and manufacture 
the products, typically receive safety reports about the 
products first, and are required to alert the FDA to any 
product-related risks they uncover. FDA, on the other hand, is 
responsible for overseeing the safety of hundreds of thousands 
of drugs and medical devices. The U.S. Supreme Court recognized 
this reality in Wyeth v. Levine, in which it found: ``The FDA 
has limited resources to monitor the 11,000 drugs on the 
market, and manufacturers have superior access to information 
about their drugs, especially in the post-marketing phase as 
new risks emerge.''\195\ Simply put: H.R. 5/Title III would 
weaken the tort system's critically important layer of consumer 
protection.
---------------------------------------------------------------------------
    \195\Wyeth v. Levine, 129 S. Ct. 1187 (2009).
---------------------------------------------------------------------------
    For these reasons and more, it is irresponsible--even 
dangerous--to sweep drug and medical device cases within the 
scope of the HEALTH Act/Title III. In our view, such lawsuits 
should continue to stand on their own--subject to the 
substantive and procedural law that now governs them--so as to 
help ensure that these products remain as safe as possible 
while at the same time, providing the opportunity for adequate 
compensation for those individuals who have been harmed.

                               CONCLUSION

    Our colleagues on the Committee on the Judiciary who also 
filed dissenting views on H.R. 5 have summed up our own views 
quite well:
          Collectively, the `reforms' proposed by H.R. 5 would 
        limit a patient's ability to recover compensation for 
        damages caused by medical negligence, defective 
        products, and irresponsible insurance practices. In 
        addition to raising core issues of fairness, H.R. 5 
        preempts the law in all 50 states, with little regard 
        for the consequences. The legislation was designed more 
        than 20 years ago to resolve an insurance `crisis', but 
        all available evidence shows that the insurance market 
        is not in crisis today. H.R. 5 does not make insurance 
        more available, does not cut spending to any 
        appreciable degree, and does not address issues of 
        access to justice or patient safety. Because H.R. 5 
        solves few problems facing Americans and exacerbates 
        many real ones, we believe the Congress should reject 
        this bill.\196\
---------------------------------------------------------------------------
    \196\House Committee on the Judiciary, HEALTH Act, Dissenting 
Views, 112th Cong., p. 118 (Mar. 17, 2011) (H. Rept. No. 112-39, Part 
1).
---------------------------------------------------------------------------
    We concur in this assessment of the HEALTH Act/Title III 
and join with these colleagues in opposing this legislation.

                                   Henry A. Waxman,
                                           Ranking Member.
                                   Frank Pallone, Jr.,
                                           Ranking Member, Subcommittee 
                                               on Health.
             TITLE III--THE COMMITTEE ON FINANCIAL SERVICES
                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
                           Committee on Financial Services,
                                    Washington, DC, April 27, 2012.
Hon. Paul Ryan,
Chairman, Committee on Budget,
Washington, DC.
    Dear Chairman Ryan: Pursuant to section 201 (a) of the 
Concurrent Resolution on the Budget for Fiscal Year 2013 (H. 
Con. Res. 112), I hereby transmit to the Committee on the 
Budget the recommendations which were approved by vote of the 
Committee on Financial Services on April 18, 2012, and the 
appropriate accompanying material including dissenting views. 
This submission is for the purpose of complying with the 
reconciliation directives included in H. Con. Res. 112, and is 
consistent with section 310 of the Congressional Budget and 
Impoundment Control Act of 1974.
    If you have any questions, please do not hesitate to have 
your staff contact Natalie McGarry of my staff. Thank you for 
your attention to this matter.
            Sincerely,
                                            Spencer Bachus,
                                                          Chairman.
                           TABLE OF CONTENTS

                               __________
                                                                   Page
Purpose and Summary..............................................   154
    Subtitle A--Orderly Liquidation Fund.........................   154
    Subtitle B--Home Affordable Modification Program.............   154
    Subtitle C--Bureau of Consumer Financial Protection..........   155
    Subtitle D--Flood Insurance Reform...........................   155
    Subtitle E--Office of Financial Research.....................   155
Background and Need for Legislation..............................   155
    Subtitle A--Orderly Liquidation Fund.........................   155
    Subtitle B--Home Affordable Modification Program.............   156
    Subtitle C--Bureau of Consumer Financial Protection..........   157
    Subtitle D--Flood Insurance Reform...........................   158
    Subtitle E--Office of Financial Research.....................   159
Hearings.........................................................   160
    Subtitle A--Orderly Liquidation Fund.........................   160
    Subtitle B--Home Affordable Modification Program.............   160
    Subtitle C--Bureau of Consumer Financial Protection..........   160
    Subtitle D--Flood Insurance Reform...........................   161
    Subtitle E--Office of Financial Research.....................   162
Committee Consideration..........................................   163
Committee Votes..................................................   163
Constitutional Authority Statement...............................   169
    Subtitle A--Orderly Liquidation Fund.........................   169
    Subtitle B--Home Affordable Modification Program.............   169
    Subtitle C--Bureau of Consumer Financial Protection..........   169
    Subtitle D--Flood Insurance Reform...........................   169
    Subtitle E--Office of Financial Research.....................   169
Committee Oversight Findings.....................................   169
Performance Goals and Objectives.................................   170
    Subtitle A--Orderly Liquidation Fund.........................   170
    Subtitle B--Home Affordable Modification Program.............   170
    Subtitle C--Bureau of Consumer Financial Protection..........   170
    Subtitle D--Flood Insurance Reform...........................   170
    Subtitle E--Office of Financial Research.....................   171
New Budget Authority, Entitlement Authority, and Tax Expenditures   171
Committee Cost Estimate..........................................   171
Congressional Budget Office Estimate.............................   171
Federal Mandates Statement.......................................   182
Advisory Committee Statement.....................................   182
    Subtitle A--Orderly Liquidation Fund.........................   182
    Subtitle B--Home Affordable Modification Program.............   182
    Subtitle C--Bureau of Consumer Financial Protection..........   182
    Subtitle D--Flood Insurance Reform...........................   182
    Subtitle E--Office of Financial Research.....................   183
Applicability to Legislative Branch..............................   183
    Subtitle A--Orderly Liquidation Fund.........................   183
    Subtitle B--Home Affordable Modification Program.............   183
    Subtitle C--Bureau of Consumer Financial Protection..........   183
    Subtitle D--Flood Insurance Reform...........................   183
    Subtitle E--Office of Financial Research.....................   183
Earmark Identification...........................................   183
    Subtitle A--Orderly Liquidation Fund.........................   183
    Subtitle B--Home Affordable Modification Program.............   183
    Subtitle C--Bureau of Consumer Financial Protection..........   183
    Subtitle D--Flood Insurance Reform...........................   184
    Subtitle E--Office of Financial Research.....................   184
Section-by-Section Analysis of the Legislation...................   184
    Subtitle A--Orderly Liquidation Fund.........................   184
    Subtitle B--Home Affordable Modification Program.............   184
    Subtitle C--Bureau of Consumer Financial Protection..........   185
    Subtitle D--Flood Insurance Reform...........................   185
    Subtitle E--Office of Financial Research.....................   191
Changes in Existing Law..........................................   191
Dissenting Views.................................................   358

                          Purpose and Summary

    On March 29, 2012, the House passed the concurrent 
resolution on the budget for fiscal year 2013, H. Con. Res. 
112, by a vote of 228 yeas to 191 nays. That budget resolution 
instructed the Committee on Financial Services to submit 
legislative recommendations to the Committee on the Budget that 
reduce the deficit by $3 billion for fiscal years 2012 and 
2013, $16.7 billion for fiscal years 2012 through 2017, and 
$29.8 billion for fiscal years 2012 through 2022. To fulfill 
the instructions set forth in H. Con. Res. 112, the Committee 
on Financial Services recommends the following legislation, set 
forth in Title III, to the Budget Committee:

                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Subtitle A would repeal Title II of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act) 
(P.L. 111-203). The Congressional Budget Office (CBO) estimates 
that Subtitle A would reduce direct spending by $3.383 billion 
for fiscal years 2012 and 2013, $13.585 billion for fiscal 
years 2012 through 2017, and $22 billion for fiscal years 2012 
through 2022.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Subtitle B--previously introduced as H.R. 839, the HAMP 
Termination Act, and passed by the House--would terminate the 
authority of the Treasury Department to provide any new 
assistance to homeowners under the Home Affordable Modification 
Program (HAMP) authorized under Title I of the Emergency 
Economic Stabilization Act (12 U.S.C. 5230), while preserving 
any assistance already provided to HAMP participants on a 
permanent or trial basis. Subtitle B also provides for a study 
by the Treasury Department to identify best practices for 
making existing mortgage assistance programs available to 
veterans, active duty military personnel, and their relatives. 
The CBO estimates that Subtitle B would reduce direct spending 
by $617 million for fiscal years 2012 and 2013, $2.624 billion 
for fiscal years 2012 through 2017, and $2.838 billion for 
fiscal years 2012 through 2022.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Subtitle C would eliminate the direct funding of the 
Consumer Financial Protection Bureau (CFPB) by the Federal 
Reserve and instead fund the CFPB through Congressional 
appropriations. Subtitle C would authorize the appropriation of 
$200 million to fund the CFPB for fiscal years 2012 and 2013, 
and would repeal the Consumer Financial Protection Fund and the 
Consumer Financial Civil Penalty Fund. The CBO estimates that 
Subtitle C would reduce direct spending by $381 million for 
fiscal years 2012 and 2013, $2.435 billion for fiscal years 
2012 through 2017, and $5.387 billion for fiscal years 2012 
through 2022.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Subtitle D--previously introduced as H.R. 1309, the Flood 
Insurance Reform Act of 2011 and passed by the House--would 
reauthorize the National Flood Insurance Program (NFIP) through 
September 30, 2016, and amend the National Flood Insurance Act 
to ensure the immediate and near-term fiscal and administrative 
health of the NFIP. Subtitle D would ensure the NFIP's 
continued viability by encouraging broader participation in the 
program, increasing financial accountability, eliminating 
unnecessary rate subsidies, and updating the program to meet 
the needs of the 21st century. The key provisions of Subtitle D 
include: (1) a five-year reauthorization of the NFIP; (2) a 
three-year delay in the mandatory purchase requirement for 
certain properties in newly designated Special Flood Hazard 
Areas (SFHAs); (3) a phase-in of full-risk, actuarial rates for 
areas newly designated as Special Flood Hazard; (4) a 
reinstatement of the Technical Mapping Advisory Council; and 
(5) an emphasis on greater private sector participation in 
providing flood insurance coverage. The CBO estimates that 
Subtitle D would reduce direct spending by $880 million for 
fiscal years 2012 through 2017, and $4.9 billion for fiscal 
years 2012 through 2022.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Subtitle E would eliminate the Office of Financial Research 
(OFR), an office within the Department of the Treasury which 
was established by the Dodd-Frank Act. The CBO estimates that 
Subtitle E would reduce direct spending by $270 million over 
the next ten years.

                  Background and Need for Legislation


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Title II of the Dodd-Frank Act establishes a so-called 
Orderly Liquidation Authority (OLA) that grants the Federal 
Deposit Insurance Corporation (FDIC) the authority to resolve 
large non-bank financial institutions. Title II authorizes the 
FDIC to act as the receiver for the failing institution. Title 
II further authorizes the FDIC to borrow from the Treasury an 
amount equal to up to 10% of the institution's total assets in 
the 30 days immediately following the FDIC's appointment as 
receiver, and after 30 days, the FDIC can borrow up to 90% of 
the firm's total assets. The FDIC can then use those funds to 
pay off the creditors of a failed firm. Proponents of Title II 
have asserted that taxpayer funds would not be used to 
liquidate a failed firm, pointing to provisions that 
contemplate recouping the costs of the liquidation from large 
financial institutions through post hoc assessments. Despite 
these assertions, CBO has estimated that Title II will cost 
taxpayers $22 billion between 2012 and 2022. Repealing Title II 
thus relieves taxpayers of the burden of bailing out the 
creditors of large financial institutions, thereby reducing 
moral hazard by making it clear that creditors--rather than 
taxpayers--will bear the costs of failure. Repealing Title II 
would not only restore market discipline, according to the CBO 
it would also achieve savings for the purposes of deficit 
reduction of $3.383 billion in FY 2012-13, $13.585 billion in 
FY 2012-17, and $22 billion in FY 2012-22.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    The standalone version of Subtitle B, H.R. 839, the HAMP 
Termination Act, was introduced by Congressman Patrick McHenry 
and Chairman Bachus to terminate new mortgage modification 
activities under the HAMP. Created under the auspices of 
Section 109 of the Troubled Asset Relief Program (TARP) enacted 
in 2008 (P.L. 110-343), HAMP is a federally-funded mortgage 
modification program that provides financial incentives to 
participating mortgage servicers to modify the mortgages of 
eligible homeowners.
    As the signature piece of the Administration's overall 
Making Home Affordable initiative on foreclosure prevention, 
HAMP has been both costly and ineffective. According to the 
Treasury Department, as of March 1, 2012, the Administration 
has obligated $29.88 billion to HAMP, although thus far it has 
only disbursed $2.54 billion. Overall, the Administration has 
obligated $45.60 billion of TARP dollars to the Making Home 
Affordable initiative, which also includes the Hardest Hit Fund 
and the FHA Refinance program.
    By any objective measure, HAMP and these other programs 
have failed to produce their promised results. The 
Administration originally projected that Making Home Affordable 
would help 7 to 9 million homeowners, yet foreclosures have 
remained elevated and the number of families assisted by the 
program--approximately 1.8 million--has fallen far short of 
projections. There were roughly 1.1 million completed 
foreclosures in 2010 and 830,000 more completed foreclosures in 
2011. As of February 2012, more than 1.3 million mortgages in 
the United States were 90 days or more delinquent and around 12 
percent of the loans outstanding in the market were delinquent 
in some way.
    HAMP itself, which was initially projected to modify 3 to 4 
million loans, has begun only 1.99 million cumulative trial 
modifications according to program performance data through 
February 2012. Of those trial modifications, only 782,609 (39 
percent) have transitioned to active permanent modifications 
along with only 68,539 active trial loans. Meanwhile, nearly 
half of the trial modifications started (957,677) were 
cancelled in the trial or permanent modification stage.
    Additional concerns have been raised about the benefit to 
participants of a mortgage modification program that gives 
borrowers a false sense of hope as they struggle to keep their 
homes. The Special Inspector General for the Troubled Asset 
Relief Program (SIGTARP) has testified before Congress that 
HAMP is a program that ``benefits only a small portion of 
distressed homeowners, offers others little more than false 
hope, and in certain cases causes more harm than good.'' In 
those cases, HAMP harms those borrowers who provisionally make 
reduced loan payments during a trial period but do not qualify 
for permanent modifications. When they are rejected from the 
program, these borrowers are told that they owe back payments, 
interest, and fees; sometimes they are asked to make up these 
deficiencies in a lump-sum payment. For some borrowers, that 
reversal constitutes their last gasp, as their increased 
indebtedness and tarnished credit rating preclude them from 
qualifying for a private-sector proprietary loan modification 
program which might have helped them retain their home.
    In addition to its high cost and poor track record, HAMP 
has also been plagued by poor administration and resistance to 
proper oversight since its inception, placing taxpayers at 
risk. For example, the Government Accountability Office (GAO) 
has cited the Treasury Department for not having ``fully 
implemented all of our prior recommendations to increase the 
transparency, accountability, and consistency of the program.'' 
The Congressional Oversight Panel for TARP has noted that 
``despite repeated urgings from the Panel, Treasury has failed 
to collect and analyze data that would explain HAMP's 
shortcomings, and it does not even have a way to collect data 
for many of HAMP's add-on programs.'' The SIGTARP has added 
that HAMP ``has been beset by problems from the outset and, 
despite frequent retooling, continues to fall dramatically 
short of any meaningful standard of success.''
    HAMP, for all its good intentions, has thus far impeded the 
recovery of the housing market and prolonged economic 
uncertainty. Enacting Subtitle B would not only end this 
costly, ineffective, injurious, and poorly run program, 
according to the CBO it would also achieve savings for the 
purposes of deficit reduction of $617 million in FY 2012-13, 
$2.624 billion in FY 2012-17, and $2.838 billion in FY 2012-22.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Title X of the Dodd-Frank Act created the CFPB as an 
independent agency housed within the Federal Reserve System, 
and charged it with regulating ``the offering and provision of 
consumer financial products or services'' under the federal 
consumer financial laws. The Dodd-Frank Act authorizes the CFPB 
to fund itself by drawing money from the Federal Reserve to the 
extent the CFPB's Director deems ``necessary.'' The Federal 
Reserve does not oversee the agency or exercise any authority 
over it, but the Federal Reserve must transfer to the CFPB 
whatever funds its Director requests, up to the following fixed 
percentages of the Federal Reserve's 2009 operating expenses: 
11 percent in fiscal year 2012, or $547.8 million; 12 percent 
in fiscal year 2013, or $597.6 million; and 12 percent each 
fiscal year thereafter, subject to annual adjustments for 
inflation. These funds--diverted from the Federal Reserve to 
the CFPB--would otherwise have been forwarded from the Federal 
Reserve to the Treasury, where they could have been used to pay 
for other expenditures or to reduce the debt.
    Given that the CFPB's funding is not appropriated by 
Congress, many observers have raised concerns about the lack of 
transparency in the CFPB's funding and expenditures and 
Congress's ability to exercise oversight of the CFPB. In light 
of these concerns, Subtitle C would end the direct funding of 
the CFPB by the Federal Reserve and repealing the Consumer 
Financial Protection Fund and the Consumer Financial Civil 
Penalty Fund. Subtitle C would subject the CFPB to regular 
appropriations and authorize an appropriation of $200 million 
to fund the CFPB for fiscal years 2012 and 2013. Subtitle C 
would thus make the CFPB accountable to Congress and make its 
funding transparent. Moreover, Subtitle C would achieve savings 
for the purposes of deficit reduction of $381 million in FY 
2012-13, $2.435 billion in FY 2012-17, and $5.387 billion in FY 
2012-22, according to CBO.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Recognizing that the private sector lacked the capacity to 
manage flood risk, in 1968 Congress created the NFIP to address 
that risk and ease the burden on taxpayers for flood losses 
paid out in the form of post-disaster relief following annual 
flooding and severe flooding following hurricanes. The NFIP is 
administered by the Federal Emergency Management Agency (FEMA), 
which is housed in the Department of Homeland Security. The 
NFIP manages the risk posed by floods in three ways: (i) 
identifying flood hazards; (ii) managing the use of land in 
floodplains (e.g., by establishing land use controls and 
setting building codes); and (iii) providing insurance 
protection. The NFIP plays a crucial role: without the flood 
insurance provided by the NFIP, homebuyers or businesses cannot 
close real estate transactions on properties located in areas 
that have been designated as Special Flood Hazard Areas 
(SFHAs).
    Although the NFIP generated premium income of approximately 
$3.3 billion in 2010, those premiums cannot make up for losses 
that the NFIP sustained in earlier years. The 2005 hurricane 
season resulted in significant claims against the NFIP, and 
annual premium income could not cover them. To pay these 
claims, the NFIP borrowed from the U.S. Treasury. Before 2005, 
the NFIP's borrowing authority was limited by statute to $1.5 
billion. To make up the shortfall that resulted from the 2005 
hurricane season, Congress increased the NFIP's borrowing 
authority three times between September 2005 and January 2007, 
raising it from $1.5 billion to $20.8 billion. As of February 
29, 2012, the NFIP owed $17.775 billion to the U.S. Treasury.
    Notwithstanding the importance of the NFIP to those that 
live and do business in SFHAs, Congress has not passed a long-
term NFIP reauthorization and reform bill since 2004 (P.L. 108-
264). During the 110th Congress, the House and Senate each 
passed significant reform measures but could not agree on final 
legislation. Since September 2008, the NFIP has been extended 
on a short-term basis 16 times. During that same time period, 
the NFIP's authorization has lapsed three times. In 2011, after 
several short-term extensions and three temporary lapses, 
Congress extended the NFIP through May 31, 2012. These short-
term extensions and lapses have created needless uncertainty in 
the residential and commercial real estate sectors in 
communities across the country. Private insurance companies 
that voluntarily participate in the NFIP find it difficult to 
continue participating, given the uncertainty of the NFIP 
authorization.
    Since 2006, the GAO has identified the NFIP as ``high-
risk'' because of inadequate management and insufficient funds. 
To reauthorize this much-needed program while addressing the 
weaknesses that make it difficult for the NFIP to return to 
solvency, Subtitle D institutes reforms that will improve the 
NFIP's financial stability, reduce the burden on taxpayers, and 
facilitate the creation of a private market that eliminates 
taxpayer risk over the long-term. In addition, the CBO 
estimates that Subtitle D would achieve savings for the 
purposes of deficit reduction of $880 million in FY 2012-17 and 
$4.9 billion in FY 2012-22.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    The Dodd-Frank Act established the OFR as an office within 
the Department of the Treasury and charged the OFR with 
supporting the Financial Stability Oversight Council (FSOC) by 
collecting information; standardizing the types and formats of 
data reported and collected; performing applied research and 
long-term research; developing tools for risk measurement and 
monitoring; and making the results of its activities available 
to financial regulatory agencies.
    Congress does not appropriate the OFR's funding. Through 
July 2012, the OFR is funded by the Federal Reserve. Following 
that, the OFR will fund itself and the FSOC by levying 
assessments on bank holding companies with total consolidated 
assets of $50 billion or more and nonbank financial companies 
supervised by the Federal Reserve. In FY 2011, the OFR's total 
expenses were $14,249,000. In FY 2012, the OFR's expenses are 
projected to total $122,626,000, funded from both transfers 
from the Federal Reserve and assessments on financial 
institutions: $91,742,000 in transfers and $119,000,000 in 
assessments. In FY 2013, the OFR is expected to spend 
$157,745,000 and bring in $168,000,000 in assessments.
    The Dodd-Frank Act empowers the OFR to demand ``all data 
necessary'' from financial companies, including banks, hedge 
funds, private equity firms, and brokerages. Such data would 
include sensitive, non-public information such as the 
identities of counterparties for credit default swaps, as well 
as information about individual loans such as interest rate and 
maturity. Because much of the information collected by the OFR 
is likely to be duplicative of information requested by other 
financial regulatory agencies, it will drive up compliance 
costs, which could further reduce the availability of credit 
and increase the cost of financial services for businesses and 
consumers. The CBO has estimated that Subtitle E would reduce 
direct spending by $270 million over the next ten years.

                                Hearings


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    On June 14, 2011, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled ``Does 
the Dodd-Frank Act End `Too Big to Fail'?'' This was a two-
panel hearing, and the following witnesses testified:

Panel One

     Mr. Michael H. Krimminger, General Counsel, 
Federal Deposit Insurance Corporation
     Ms. Christy Romero, Acting Special Inspector 
General, Office of the Special Inspector General, Troubled 
Asset Relief Program

Panel Two

     Mr. Stephen J. Lubben, Daniel J. Moore Professor 
of Law, Seton Hall University School of Law
     The Honorable Michael Barr, Professor of Law, 
University of Michigan Law School

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    On March 2, 2011, the Subcommittee on Insurance, Housing 
and Community Opportunity held a hearing titled ``Legislative 
Proposals to End Taxpayer Funding for Ineffective Foreclosure 
Mitigation Programs.'' This was a one-panel hearing, and the 
following witnesses testified:
     The Honorable Neil M. Barofsky, Special Inspector 
General for the Troubled Asset Relief Program, Office of the 
Special Inspector General
     The Honorable David Stevens, Assistant Secretary 
for Housing and Commissioner of the Federal Housing 
Administration, Department of Housing and Urban Development
     The Honorable Mercedes M. Marquez, Assistant 
Secretary, Community Planning and Development, Department of 
Housing and Urban Development
     Mr. Matthew J. Scire, Director, Financial Markets 
and Community Investment, U.S. Government Accountability Office
     Ms. Katie Jones, Analyst in Housing Policy, 
Congressional Research Service, Library of Congress

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    The Subcommittee on Financial Institutions and Consumer 
Credit held a hearing on March 16, 2011, titled ``Oversight of 
the Consumer Financial Protection Bureau.'' The sole witness at 
this hearing was:
     Ms. Elizabeth Warren, Special Advisor to the 
Secretary of the Treasury for the Consumer Financial Protection 
Bureau, Department of the Treasury
    On April 6, 2011, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled 
``Legislative Proposals to Improve the Structure of the 
Consumer Financial Protection Bureau.'' This was a one-panel 
hearing, and the following witnesses testified:
     Ms. Leslie R. Andersen, President and Chief 
Executive Officer, Bank of Bennington on behalf of the American 
Bankers Association
     Ms. Lynette W. Smith, President and Chief 
Executive Officer, Washington Gas Light FCU on behalf of the 
National Association of Federal Credit Unions
     Mr. Jess Sharp, Executive Director, Center for 
Capital Markets Competitiveness, U.S. Chamber of Commerce
     Mr. Hilary Shelton, Director, NAACP Washington 
Bureau and Senior VP for Advocacy and Policy, NAACP
     Mr. Noah H. Wilcox, President and Chief Executive 
Officer, Grand Rapids State Bank on behalf of the Independent 
Community Bankers of America
     Mr. Rod Staatz, President and Chief Executive 
Officer, SECU of Maryland on behalf of the Credit Union 
National Association
     Mr. Richard Hunt, President, Consumer Bankers 
Association
     Prof. Adam J. Levitin, Georgetown University Law 
Center
    On November 2, 2011, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled ``The 
Consumer Financial Protection Bureau: The First 100 Days.'' The 
sole witness at this hearing was:
     Mr. Raj Date, Special Advisor to the Secretary of 
the Treasury, The Consumer Financial Protection Bureau
    On February 8, 2012, the Subcommittee on Financial 
Institutions and Consumer Credit held a hearing titled 
``Legislative Proposals to Promote Accountability and 
Transparency at the Consumer Financial Protection Bureau.'' 
This was a one-panel hearing and the following witnesses 
testified:
     Mr. Michael J. Hunter, Chief Operating Officer, 
American Bankers Association
     Mr. Andrew J. Pincus, Partner, Mayer Brown LLP, on 
behalf of the U.S. Chamber of Commerce
     Mr. Chris Stinebert, President and Chief Executive 
Officer, American Financial Services Association
     Mr. Arthur E. Wilmarth, Jr., Professor of Law, The 
George Washington University
    On February 15, 2012, the Subcommittee on Oversight and 
Investigations held a hearing titled ``Budget Hearing--Consumer 
Financial Protection Bureau.'' The sole witness at this hearing 
was:
     The Honorable Richard Cordray, The Consumer 
Financial Protection Bureau
    On March 29, 2012, the Committee on Financial Services held 
a hearing titled ``The Semi-Annual Report of the Consumer 
Financial Protection Bureau.'' The sole witness at this hearing 
was:
     The Honorable Richard Cordray, The Consumer 
Financial Protection Bureau

                   SUBTITLE D--FLOOD INSURANCE REFORM

    On March 11, 2011, the Subcommittee on Insurance, Housing 
and Community Opportunity held a hearing titled ``Legislative 
Proposals to Reform the National Flood Insurance Program.'' 
This was a two-panel hearing, and the following witnesses 
testified:

Panel One

     Ms. Orice Williams Brown, Managing Director, 
Government Accountability Office
     Ms. Sally McConkey, Vice Chair, Association of 
State Flood Plain Managers and Manager, Coordinated Hazard 
Assessment and Mapping Program, Illinois State Water Survey

Panel Two

     Mr. Stephen Ellis, on behalf of the SmarterSafer 
Coalition, and Vice President, Taxpayers for Common Sense, 
Washington, D.C.
     Mr. Terry Sullivan, Chair, Committee on Flood 
Insurance, National Association of REALTORS' and 
Owner, Sullivan Realty, Spokane, Washington
     Mr. Spencer Houldin, Chair, Government Affairs 
Committee, Independent Insurance Agents and Brokers of America 
and President, Ericson Insurance Services, Washington Depot, 
Connecticut
     Mr. Franklin Nutter, President, Reinsurance 
Association of America, Washington, D.C.
     Ms. Sandra G. Parrillo, Chair, National 
Association of Mutual Insurance Companies and President and CEO 
of Providence Mutual Fire Insurance Company, Warwick, Rhode 
Island
     Ms. Donna Jallick, on behalf of the Property 
Casualty Insurers Association of America, and Vice President, 
Flood Operations, Harleysville Insurance, Harleysville, 
Pennsylvania
     Mr. Barry Rutenberg, First Vice Chairman, National 
Association of Home Builders, Washington, D.C.
    On April 1, 2011, the Subcommittee on Insurance, Housing 
and Community Opportunity held a hearing titled ``Legislative 
Proposals to Reform the National Flood Insurance Program, Part 
II.'' The sole witness at this hearing was:
     The Honorable W. Craig Fugate, Administrator, 
Federal Emergency Management Agency.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    On July 14, 2011, the Subcommittee on Oversight and 
Investigations Credit held a hearing titled ``Oversight of the 
Office of Financial Research and the Financial Stability 
Oversight Council.'' This was a two-panel hearing and the 
following witnesses testified:

Panel One

     The Honorable Richard Berner, Counselor to the 
Secretary of the Treasury

Panel Two

     Dr. Nassim N. Taleb, Distinguished Professor, New 
York University Polytechnic Institute
     Mr. Dilip Krishna, Vice President of Financial 
Services, Teradata Corporation
     Mr. Alan Paller, Director of Research, SANS 
Institute
     Dr. John Lietchy, Professor of Marketing and 
Statistics, Director of the Center for the Study of Global 
Financial Stability, Pennsylvania State University

                        Committee Consideration

    The Committee on Financial Services met in open session on 
April 18, 2012, and ordered the Committee Print of budget 
reconciliation legislative recommendations of the Committee on 
Financial Services, as amended, transmitted to the Committee on 
the Budget by a record vote of 31 yeas and 26 nays (Record vote 
no. FC-76).

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Chairman Bachus to order the Committee Print, as 
amended, transmitted to the Committee on the Budget was agreed 
to by a record vote of 31 yeas and 26 nays (Record vote no. FC-
76). The names of Members voting for and against follow:

                                              RECORD VOTE NO. FC-76
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................        X   ........  .........  Mr. Frank (MA)...  ........        X   .........
Mr. Hensarling.................        X   ........  .........  Ms. Waters.......  ........        X   .........
Mr. King (NY)..................        X   ........  .........  Mrs. Maloney.....  ........        X   .........
Mr. Royce......................        X   ........  .........  Mr. Gutierrez....  ........        X   .........
Mr. Lucas......................        X   ........  .........  Ms. Velazquez....  ........        X   .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........  ........        X   .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....  ........        X   .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......  ........        X   .........
Mrs. Biggert...................        X   ........  .........  Mr. Meeks........  ........        X   .........
Mr. Gary G. Miller (CA)........        X   ........  .........  Mr. Capuano......  ........        X   .........
Mrs. Capito....................        X   ........  .........  Mr. Hinojosa.....  ........        X   .........
Mr. Garrett....................        X   ........  .........  Mr. Clay.........  ........        X   .........
Mr. Neugebauer.................        X   ........  .........  Mrs. McCarthy      ........        X   .........
                                                                 (NY).
Mr. McHenry....................        X   ........  .........  Mr. Baca.........  ........        X   .........
Mr. Campbell...................        X   ........  .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................        X   ........  .........  Mr. Miller (NC)..  ........        X   .........
Mr. McCotter...................        X   ........  .........  Mr. David Scott    ........        X   .........
                                                                 (GA).
Mr. McCarthy (CA)..............        X   ........  .........  Mr. Al Green (TX)  ........        X   .........
Mr. Pearce.....................        X   ........  .........  Mr. Cleaver......  ........        X   .........
Mr. Posey......................        X   ........  .........  Ms. Moore........  ........        X   .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Ellison......  ........        X   .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................        X   ........  .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......  ........        X   .........
Mr. Duffy......................        X   ........  .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................        X   ........  .........  Mr. Peters.......  ........        X   .........
Mr. Renacci....................        X   ........  .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................        X   ........  .........
Mr. Dold.......................        X   ........  .........
Mr. Schweikert.................        X   ........  .........
Mr. Grimm......................        X   ........  .........
Mr. Canseco....................        X   ........  .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

    During consideration of the Committee Print by the 
Committee, the following amendments were considered:
    1. An amendment offered by Ms. Moore, no. 1, to strike 
Subtitle A, was not agreed to by a record vote of 23 yeas and 
29 nays (Record vote no. FC-69).

                                              RECORD VOTE NO. FC-69
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......  ........  ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........  ........  ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........  ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......  ........  ........  .........
Mr. Westmoreland...............  ........  ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    2. An amendment offered by Mr. Frank and Mr. Gutierrez, no. 
2, to impose a $30 billion special assessment on certain 
financial institutions to be deposited in a Taxpayer Protection 
and Financial Stability Fund, was not agreed to by a record 
vote of 22 yeas and 33 nays (Record vote no. FC-70).

                                              RECORD VOTE NO. FC-70
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........  ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........  ........  .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    3. An amendment offered by Mrs. Maloney, no. 3, to strike 
Subtitle C, was not agreed to by a record vote of 26 yeas and 
29 nays (Record vote no. FC-71).

                                              RECORD VOTE NO. FC-71
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........  ........  .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........  ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    4. An amendment offered by Mr. Frank, no. 4, to fund the 
Federal Reserve's non-monetary policy functions through 
Congressional appropriations, was not agreed to by a record 
vote of 24 yeas and 33 nays (Record vote no. FC-72).

                                              RECORD VOTE NO. FC-72
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........  .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......  ........        X   .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    5. Am amendment offered by Mr. Miller of N.C., no. 5, to 
fund the Office of the Comptroller of the Currency through 
Congressional appropriations, was not agreed to by a record 
vote of 22 yeas and 35 nays (Record Vote no. FC-73).

                                              RECORD VOTE NO. FC-73
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........  ........        X   .........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........  ........        X   .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............        X   ........  .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................        X   ........  .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........  ........        X   .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......  ........        X   .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......  ........        X   .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................        X   ........  .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    6. An amendment offered by Mr. Miller of N.C., no. 8, to 
establish a fund, paid for by certain financial institutions, 
to cover costs that Fannie Mae and Freddie Mac may incur in 
connection with mortgages they own or guarantee and which they 
purchased from an ``underperforming'' servicer, was not agreed 
to by a record vote of 21 yeas and 36 nays (Record vote no. FC-
74).

                                              RECORD VOTE NO. FC-74
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........  ........        X   .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......  ........        X   .........
Mr. Westmoreland...............  ........        X   .........  Mr. Perlmutter...  ........        X   .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....  ........        X   .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......  ........        X   .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    7. An amendment offered by Mr. Miller of N.C., no. 12, to 
define breaches of representations and warranties made in 
connection with the sale of a mortgage asset to Fannie Mae and 
Freddie Mac as violations of the False Claims Act, was not 
agreed to by a record vote of 26 yeas and 31 nays (Record vote 
no. FC-75).

                                              RECORD VOTE NO. FC-75
----------------------------------------------------------------------------------------------------------------
         Representative             Aye       Nay     Present     Representative      Aye       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Bachus.....................  ........        X   .........  Mr. Frank (MA)...        X   ........  .........
Mr. Hensarling.................  ........        X   .........  Ms. Waters.......        X   ........  .........
Mr. King (NY)..................  ........        X   .........  Mrs. Maloney.....        X   ........  .........
Mr. Royce......................  ........        X   .........  Mr. Gutierrez....        X   ........  .........
Mr. Lucas......................  ........        X   .........  Ms. Velazquez....        X   ........  .........
Mr. Paul.......................  ........  ........  .........  Mr. Watt.........        X   ........
Mr. Manzullo...................  ........  ........  .........  Mr. Ackerman.....        X   ........  .........
Mr. Jones......................  ........  ........  .........  Mr. Sherman......        X   ........  .........
Mrs. Biggert...................  ........        X   .........  Mr. Meeks........        X   ........  .........
Mr. Gary G. Miller (CA)........  ........        X   .........  Mr. Capuano......        X   ........  .........
Mrs. Capito....................  ........        X   .........  Mr. Hinojosa.....        X   ........  .........
Mr. Garrett....................  ........        X   .........  Mr. Clay.........        X   ........  .........
Mr. Neugebauer.................  ........        X   .........  Mrs. McCarthy            X   ........  .........
                                                                 (NY).
Mr. McHenry....................  ........        X   .........  Mr. Baca.........        X   ........  .........
Mr. Campbell...................  ........        X   .........  Mr. Lynch........  ........  ........  .........
Mrs. Bachmann..................  ........        X   .........  Mr. Miller (NC)..        X   ........  .........
Mr. McCotter...................  ........        X   .........  Mr. David Scott          X   ........  .........
                                                                 (GA).
Mr. McCarthy (CA)..............  ........        X   .........  Mr. Al Green (TX)        X   ........  .........
Mr. Pearce.....................  ........        X   .........  Mr. Cleaver......        X   ........  .........
Mr. Posey......................  ........        X   .........  Ms. Moore........        X   ........  .........
Mr. Fitzpatrick................  ........        X   .........  Mr. Ellison......        X   ........  .........
Mr. Westmoreland...............  ........        X   .........  Mr. Perlmutter...        X   ........  .........
Mr. Luetkemeyer................  ........        X   .........  Mr. Donnelly.....        X   ........  .........
Mr. Huizenga...................  ........        X   .........  Mr. Carson.......        X   ........  .........
Mr. Duffy......................  ........        X   .........  Mr. Himes........        X   ........  .........
Ms. Hayworth...................  ........        X   .........  Mr. Peters.......        X   ........  .........
Mr. Renacci....................  ........        X   .........  Mr. Carney.......        X   ........  .........
Mr. Hurt.......................  ........        X   .........
Mr. Dold.......................  ........        X   .........
Mr. Schweikert.................  ........        X   .........
Mr. Grimm......................  ........        X   .........
Mr. Canseco....................  ........        X   .........
Mr. Stivers....................  ........        X   .........
Mr. Fincher....................  ........        X   .........
----------------------------------------------------------------------------------------------------------------

    The following amendments were also considered by the 
Committee:
    1. An amendment offered by Mr. Perlmutter and Mrs. 
McCarthy, no. 6, to reauthorize the Export-Import Bank of the 
United States, was offered and withdrawn.
    2. An amendment offered by Mr. Canseco, no. 7, to repeal 
Title I, Subtitle B of the Dodd-Frank Act, which established 
the Office of Financial Research, was agreed to by voice vote.
    3. An amendment offered by Mr. Miller of N.C., no. 9, to 
prohibit mortgage servicers and their affiliates from owning or 
holding interests in mortgage loans secured by the same 
property that is subject to the mortgage loan serviced by the 
servicer, was ruled non-germane.
    4. An amendment offered by Mr. Perlmutter, no. 10, to 
legalize, license, and regulate Internet gambling, was offered 
and withdrawn.
    5. An amendment offered by Mr. Miller of N.C., no. 11, to 
authorize the Federal Housing Finance Authority to acquire 
certain second mortgages by right of eminent domain, was 
offered and withdrawn.

                   Constitutional Authority Statement


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states; and Clause 1 of Section 8 of Article 
I of the Constitution, under which Congress has the power 
relating to the general welfare of the United States.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Congress has the power to enact this legislation pursuant 
to the following: Clause 3 of Section 8 of Article I of the 
Constitution, under which Congress has the power to regulate 
commerce among the states.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to repeal the Title II of 
the Dodd-Frank Act, which would reduce direct spending by $22 
billion, according to CBO.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to terminate the 
authority of the Treasury Department to provide new assistance 
to homeowners under HAMP under Title I of the Emergency 
Economic Stabilization Act (12 U.S.C. 5230), while preserving 
any assistance already provided to HAMP participants on a 
permanent or trial basis. Enactment of these provisions would 
reduce direct spending by $2.838 billion over ten years, 
according to CBO.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to eliminate direct 
funding of the CFPB by the Federal Reserve and instead 
recommend that the CFPB be subjected to the annual 
Congressional appropriations process. The provisions of this 
Subtitle would also authorize $200 million to be appropriated 
to fund the CFPB for fiscal years 2012 and 2013, and would 
repeal the Consumer Financial Protection Fund and the Consumer 
Financial Civil Penalty Fund. Enactment of these provisions 
would reduce direct spending by $5.387 billion over ten years, 
according to CBO.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to reauthorize the NFIP 
through September 30, 2016, and amend the National Flood 
Insurance Act to ensure the immediate and near-term fiscal and 
administrative health of the NFIP. The provisions of this 
Subtitle also ensure the NFIP's continued viability by 
encouraging broader participation in the program, increasing 
financial accountability, eliminating unnecessary rate 
subsidies, and updating the program to meet the needs of the 
21st century. The key provisions of Subtitle D include: (1) a 
five-year reauthorization of the NFIP; (2) a three-year delay 
in the mandatory purchase requirement for certain properties in 
newly designated Special Flood Hazard Areas (SFHAs); (3) a 
phase-in of full-risk, actuarial rates for areas newly 
designated as Special Flood Hazard; (4) a reinstatement of the 
Technical Mapping Advisory Council; and (5) an emphasis on 
greater private sector participation in providing flood 
insurance coverage. Enactment of these provisions would reduce 
direct spending by $4.9 billion over ten years, according to 
CBO.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The objective of this Subtitle is to eliminate the OFR, an 
office within the Department of the Treasury established by the 
Dodd-Frank Act. According to CBO, eliminating the OFR would 
reduce direct spending by approximately $270 million over the 
next ten years.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 24, 2012.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for the Reconciliation 
Recommendations of the House Committee on Financial Services.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Daniel 
Hoople.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

Reconciliation recommendations of the House Committee on Financial 
        Services

    Summary: H. Con. Res. 112, the Concurrent Budget Resolution 
for fiscal year 2013, as passed by the House of Representatives 
on March 29, 2012, instructed several committees of the House 
to recommend legislative changes that would reduce deficits 
over the 2012-2022 period. As part of this process, the House 
Committee on Financial Services was instructed to recommend 
changes to current law that would reduce the deficit by $29.8 
billion for fiscal years 2012 through 2022.
    CBO estimates that the reconciliation recommendations 
approved by the Committee on Financial Services on April 18, 
2012, would reduce direct spending by $40.9 billion and 
revenues by $10.6 billion over the 2012-2022 period, assuming 
enactment on or near October 1, 2012. Taken together, CBO 
estimates that enacting the recommendations would reduce budget 
deficits by $30.4 billion over the 2012-2022 period, assuming 
enactment on or near October 1, 2012.
    In addition, the Chairman of the House Committee on the 
Budget has directed CBO to prepare estimates assuming a July 1, 
2012, enactment date for this year's reconciliation proposals. 
If the legislation were enacted by that earlier date, some of 
the Financial Services Committee's recommendations would result 
in greater budgetary savings than those estimated assuming an 
October 1 enactment date. Under the alternative assumption of a 
July 1 enactment date, CBO estimates that the Financial 
Services proposals would reduce deficits by $4.4 billion over 
the 2012-2013 period and $31.1 billion over the 2012-2022 
period.
    The committee's recommendations would make the following 
changes:
      Subtitle A would repeal the authority provided to 
the Federal Deposit Insurance Corporation (FDIC) in the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Public 
Law 111-203) to liquidate large, systemically important 
financial companies in default or in danger of default.
      Subtitle B would terminate the authority of the 
Secretary of the Treasury to provide new assistance under the 
Home Affordable Modification Program (HAMP).
      Subtitle C would terminate transfers of funds 
from the Federal Reserve for expenses of the Bureau of Consumer 
Financial Protection (CFPB) and authorize appropriations for 
the CFPB for fiscal years 2012 and 2013.
      Subtitle D would reauthorize the National Flood 
Insurance Program (NFIP) of the Federal Emergency Management 
Agency (FEMA) through 2016 and amend the program to increase 
premiums charged to certain policyholders.
      Subtitle E would eliminate the Office of 
Financial Research (OFR), established in the Dodd-Frank Wall 
Street Reform and Consumer Protection Act.
    In addition to the changes in direct spending and revenues, 
CBO estimates that implementing the committee's recommendations 
would cost $766 million over the 2012-2017 period, assuming 
appropriation of the necessary amounts. That estimate includes 
funding for the CFPB, the Financial Stability Oversight 
Council, and flood mapping and mitigation efforts under the 
National Flood Insurance Program (NFIP).
    The legislation would impose intergovernmental and private-
sector mandates, as defined in the Unfunded Mandates Reform Act 
(UMRA), on public and private mortgage lenders. Because the 
mandates would require only small changes in existing industry 
practice, CBO expects the cost to comply with the mandates 
would be small relative to the annual thresholds established in 
UMRA for intergovernmental and private-sector mandates ($73 
million and $146 million in 2012, respectively, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
impact on direct spending and revenues of the recommendations 
of the House Committee on Financial Services is shown in the 
following tables. Table 1 summarizes those effects assuming 
that the committee recommendations are enacted around October 
1, 2012, and Table 2 displays the budgetary impact assuming 
those recommendations are enacted by July 1, 2012. (Potential 
effects on discretionary spending are not shown in Tables 1 and 
2, but those effects are mentioned in a footnote in each 
table.) The spending effects of this legislation fall within 
budget functions 370 (commerce and housing credit) and 450 
(community and regional development).

   TABLE 1. EFFECTS ON DIRECT SPENDING AND REVENUES FOR RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES, AS APPROVED BY THE COMMITTEE ON APRIL 18, 2012, ASSUMING
                                                                                ENACTMENT AROUND OCTOBER 1, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             By fiscal year, in millions of dollars--
                                                                --------------------------------------------------------------------------------------------------------------------------------
                                                                  2012    2013      2014      2015      2016      2017      2018      2019      2020      2021      2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT AROUND OCTOBER 1, 2012a

Orderly Liquidation Authority:
    Estimated Budget Authority 0...............................      0    -2,350    -3,365    -3,725    -3,360    -2,745    -2,985    -3,180    -3,370    -3,536    -3,704    -15,545    -32,320
    Estimated Outlays..........................................      0    -2,350    -3,365    -3,725    -3,360    -2,745    -2,985    -3,180    -3,370    -3,536    -3,704    -15,545    -32,320
Home Affordable Modification Program:
    Estimated Budget Authority.................................      0      -414      -573      -428      -351      -297      -202        -6         0         0         0     -2,063     -2,271
    Estimated Outlays..........................................      0      -414      -573      -428      -351      -297      -202        -6         0         0         0     -2,063     -2,271
Bureau of Consumer Financial Protection:
    Estimated Budget Authority.................................      0      -448      -495      -509      -524      -539      -557      -575      -593      -611      -631     -2,515     -5,482
    Estimated Outlays..........................................      0      -381      -488      -507      -522      -537      -554      -572      -590      -608      -628     -2,435     -5,387
National Flood Insurance Program:
    Estimated Budget Authority.................................      0         0       -60      -150       210         0         0         0         0         0         0          0          0
    Estimated Outlays..........................................      0         0       -60      -150       210         0         0         0         0         0         0          0          0
Office of Financial Research:
    Estimated Budget Authority.................................      0       -71       -93       -95       -97       -99      -101      -103      -105      -107      -108       -455       -979
    Estimated Outlays..........................................      0       -62       -93       -95       -97       -99      -101      -103      -105      -107      -108       -446       -970
    Total Changes:
        Estimated Budget Authority.............................      0    -3,283    -4,586    -4,907    -4,122    -3,680    -3,845    -3,864    -4,068    -4,254    -4,443    -20,578    -41,052
        Estimated Outlays......................................      0    -3,207    -4,579    -4,905    -4,120    -3,678    -3,842    -3,861    -4,065    -4,251    -4,440    -20,489    -40,948

                                                                  CHANGES IN REVENUES ASSUMING ENACTMENT AROUND OCTOBER 1, 2012

Orderly Liquidation Authority..................................      0         0      -180      -405      -645      -905    -1,135    -1,355    -1,570    -1,770    -1,905     -2,135     -9,870
Office of Financial Research...................................      0       -67       -68       -69       -70       -71       -72       -73       -74       -75       -76       -345       -715
                                                                --------------------------------------------------------------------------------------------------------------------------------
    Total Changes..............................................      0       -67      -248      -474      -715      -976    -1,207    -1,428    -1,644    -1,845    -1,981     -2,480    -10,585

                                           NET DEFICIT REDUCTION (-) ASSUMING ENACTMENT OF DIRECT SPENDING AND REVENUE CHANGES AROUND OCTOBER 1, 2012

Net Effect on Deficit..........................................      0    -3,140    -4,331    -4,431    -3,405    -2,702    -2,635    -2,433    -2,421    -2,406    -2,459    -18,009    -30,363
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Memorandum:

Change in Net Income to the National Flood Insurance Program:b
    Estimated Budget Authority.................................      0         0        60       150       265       405       580       775       830       890       945        880      4,900
    Estimated Outlays..........................................      0         0        60       150       265       405       580       775       830       890       945        880     4,900
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Estimates are relative to CBO's March 2012 baseline; components may not sum to totals because of rounding.
aIn addition, CBO estimates that implementing the Financial Services Committee's recommendations would cost $766 million over the 2012-2017 period, assuming appropriation of the necessary
  amounts. That estimate includes funding for the Bureau of Consumer Financial Protection, the Financial Stability Oversight Council, and for mapping and mitigation efforts under the National
  Flood Insurance Program.
bThe proposed language would raise premiums for certain subsidized flood insurance policies, increasing net income to the National Flood Insurance Program by $4.9 billion. However, because
  many policies would continue to be subsidized and the program would continue to face significant interest costs for borrowing over the past decade, CBO expects that additional receipts
  collected under this legislation would be spent to cover future program shortfalls, resulting in no net effect on the budget over the 2012-2022 period.


   TABLE 2. EFFECTS ON DIRECT SPENDING AND REVENUES FROM RECONCILIATION RECOMMENDATIONS OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES, AS APPROVED BY THE COMMITTEE ON APRIL 18, 2012, ASSUMING
                                                   ENACTMENT BY JULY 1, 2012, AS DIRECTED BY THE CHAIRMAN OF THE HOUSE COMMITTEE ON THE BUDGET
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           By fiscal year, in millions of dollars--
                                                             -----------------------------------------------------------------------------------------------------------------------------------
                                                                2012      2013      2014      2015      2016      2017      2018      2019      2020      2021      2022    2012-2017  2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 CHANGES IN DIRECT SPENDING ASSUMING ENACTMENT BY JULY 1, 2012a

Orderly Liquidation Authority:
    Estimated Budget Authority..............................      -585    -2,838    -3,046    -3,550    -3,270    -2,756    -2,990    -3,185    -3,375    -3,540    -3,705    -16,045    -32,840
    Estimated Outlays.......................................      -585    -2,838    -3,046    -3,550    -3,270    -2,756    -2,990    -3,185    -3,375    -3,540    -3,705    -16,045    -32,840
Home Affordable Modification Program:
    Estimated Budget Authority..............................         0      -617      -687      -522      -427      -371      -209        -6         0         0         0     -2,624     -2,839
    Estimated Outlays.......................................         0      -617      -687      -522      -427      -371      -209        -6         0         0         0     -2,624     -2,839
Bureau of Consumer Financial Protection:
    Estimated Budget Authority..............................         0      -448      -495      -509      -524      -539      -557      -575      -593      -611      -631     -2,515     -5,482
    Estimated Outlays.......................................         0      -381      -488      -507      -522      -537      -554      -572      -590      -608      -628     -2,435     -5,387
National Flood Insurance Program:
    Estimated Budget Authority..............................         0         0       -60      -150       210         0         0         0         0         0         0          0          0
    Estimated Outlays.......................................         0         0       -60      -150       210         0         0         0         0         0         0          0          0
Office of Financial Research:
    Estimated Budget Authority..............................         0       -91       -93       -95       -97       -99      -101      -103      -105      -107      -108       -475       -999
    Estimated Outlays.......................................         0       -74       -93       -95       -97       -99      -101      -103      -105      -107      -108       -458       -982
    Total Changes:
        Estimated Budget Authority..........................      -585    -3,994    -4,381    -4,826    -4,108    -3,765    -3,857    -3,869    -4,073    -4,258    -4,444    -21,659    -42,160
        Estimated Outlays...................................      -585    -3,910    -4,374    -4,824    -4,106    -3,763    -3,854    -3,866    -4,070    -4,255    -4,441    -21,562    -42,048

                                                                     CHANGES IN REVENUES ASSUMING ENACTMENT BY JULY 1, 2012

Orderly Liquidation Authority...............................         0       -35      -230      -455      -690      -940    -1,175    -1,390    -1,600    -1,785    -1,920     -2,350    -10,220
Office of Financial Research................................       -15       -67       -68       -69       -70       -71       -72       -73       -74       -75       -76       -360       -730
                                                             -----------------------------------------------------------------------------------------------------------------------------------
    Total Changes...........................................       -15      -102      -298      -524      -760    -1,011    -1,247    -1,463    -1,674    -1,860    -1,996     -2,710    -10,950

                                              NET DEFICIT REDUCTIONS (-) ASSUMING ENACTMENT OF DIRECT SPENDING AND REVENUE CHANGES BY JULY 1, 2012

Net Effect on Deficit.......................................      -570    -3,808    -4,076    -4,300    -3,346    -2,752    -2,607    -2,403    -2,396    -2,395    -2,445    -18,852    -31,098
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
  Memorandum:

Change in Net Income to the National Flood Insurance
 Programb
    Estimated Budget Authority..............................         0         0        60       150       265       405       580       775       830       890       945        880      4,900
    Estimated Outlays.......................................         0         0        60       150       265       405       580       775       830       890       945        880     4,900
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding.
aIn addition, CBO estimates that implementing the Financial Services Committee's recommendations would cost $766 million over the 2012-2017 period, assuming appropriation of the necessary
  amounts. That estimate includes funding for the Bureau of Consumer Financial Protection, the Financial Stability Oversight Council, and for mapping and mitigation efforts under the National
  Flood Insurance Program.
bThe proposed language would raise premiums for certain subsidized flood insurance policies, increasing net income to the National Flood Insurance Program by $4.9 billion. However, because
  many policies would continue to be subsidized and the program would continue to face significant interest costs for borrowing over the past decade, CBO expects that additional receipts
  collected under this legislation would be spent to cover future program shortfalls, resulting in no net effect on the budget over the 2012-2022 period.

    Basis of estimate: For the purposes of this estimate, CBO 
assumes the recommendations will be enacted on or near October 
1, 2012, as shown in Table 1. As directed by the Chairman of 
the House Committee on the Budget, CBO has also prepared a set 
of estimates based on the assumption that the recommendations 
are enacted by July 1, 2012. Those estimates are shown in Table 
2.

Changes in direct spending and revenues

    Five provisions in the committee's recommendations would 
reduce direct spending by $40.9 billion over the 2012-2022 
period, assuming enactment around October 1, 2012, and by $42.0 
billion over that period, assuming enactment by July 1, 2012.
    Orderly Liquidation Authority. Subtitle A would repeal the 
authority of the FDIC to liquidate large, systemically 
important financial companies (excluding insured depository 
institutions, which can be resolved using other authorities of 
the agency) that are in default or in danger of default.
    Under current law, if a financial company is determined to 
be in default or in danger of default and if its liquidation 
under applicable federal and state bankruptcy laws would have a 
significant impact on the nation's financial stability, the 
FDIC may be appointed as receiver of the failing company. As 
receiver, the FDIC would liquidate the company in an orderly 
manner with the goal of minimizing both losses to the 
receivership and disruption to the financial system. Any losses 
incurred by the receivership, including administrative costs, 
would be recouped through proceeds from asset sales and 
assessments on large bank holding companies and other nonbank 
financial companies supervised by the Federal Reserve. All of 
these transactions would be recorded in the federal budget on a 
cash basis through the Orderly Liquidation Fund (OLF).
    CBO's most recent baseline estimates for the cash flows of 
the OLF project net outlays of more than $30 billion to resolve 
failing companies and revenues from assessments of nearly $15 
billion over the 2012-2022 period to begin the recovery of 
those costs; under current law, the remainder of the costs 
would be recovered after 2022. Those baseline projections 
reflect expected values of the estimated net costs of 
liquidating one or more financial companies and the subsequent 
assessments collected to begin to recoup those costs over that 
period. CBO expects that the probability that the federal 
government would have to liquidate a financial institution in 
any given year is relatively small;\1\ however, the potential 
cash flows if the orderly liquidation authority is used would 
probably be large. As such, actual outlays and revenues will 
probably vary significantly from the above estimates (in fact, 
in many years, it is likely that no spending or revenues will 
be recorded in the budget).
---------------------------------------------------------------------------
    \1\CBO does not alter the probabilities used to calculate the 
expected values based on the current or expected future status of the 
financial system. Recognizing that certain economic and financial 
events are inherently unpredictable, those probabilities reflect CBO's 
best judgment on the basis of historical experience and do not vary 
from year to year.
---------------------------------------------------------------------------
    Because CBO assumes some small probability of a large 
financial event in every year of the projection period and 
because the majority of spending for an orderly liquidation 
would precede the recoupment of expenses, a snapshot of 
projected cash flows in any given 10-year period will reflect 
net increases in the federal deficit under current law. For 
that reason, the proposed repeal of the orderly liquidation 
authority would result in decreases in the deficit, on a cash 
basis, over the same period. (As noted above, the recoupment of 
expenses will ultimately equal the expenses, but not within the 
10-year period.)
    In addition, any assessments levied under current law to 
offset costs of the OLF will become additional business 
expenses for the large financial companies required to pay 
them. Those additional expenses would result in decreases in 
taxable income elsewhere in the economy, which would produce a 
loss of government revenue from payroll and income taxes 
(estimated to vary between 24 percent and 30 percent of the 
additional expenses during the 2013-2022 period\2\). By 
eliminating the orderly liquidation authority (and thus, any 
assessments that would be collected), expected taxable incomes 
of large financial companies would increase, resulting in 
additional revenues from payroll and income taxes. (CBO's 
estimates do not incorporate any effects of the elimination of 
the orderly liquidation authority on the probability of a 
financial crisis or economic slump--both because the agency is 
unable to assess those effects, and because standard estimating 
conventions for legislation hold aggregate economic conditions 
unchanged.)
---------------------------------------------------------------------------
    \2\Percentages used to estimate income and payroll tax offsets can 
be found at: Joint Committee on Taxation, The Income and Payroll Tax 
Offset to Changes in Excise Tax Revenues for 2012-2022 (JCX-23-12), 
March 6, 2012.
---------------------------------------------------------------------------
    Assuming enactment around October 1, 2012, CBO estimates 
that eliminating the FDIC's orderly liquidation authority would 
result in a net decrease in the federal deficit of $22.5 
billion over the 2012-2022 period (or $22.6 billion if enacted 
by July 1, 2012).
    Home Affordable Modification Program. Subtitle B of the 
committee's recommendations would terminate the Department of 
Treasury's Home Affordable Modification Program (HAMP) that 
aims to help homeowners facing the possibility of foreclosure 
by subsidizing loan modifications as well as other foreclosure 
alternatives.
    HAMP funds are used to cover costs incurred to modify 
mortgages that are not owned or guaranteed by the government-
sponsored enterprises (GSEs) Fannie Mae or Freddie Mac. 
Generally, the program provides incentive payments to mortgage 
servicers, investors, and eligible homeowners to either reduce 
a homeowner's mortgage payment to 31 percent of their monthly 
income or to sell their house outside of foreclosure. Through 
February 29, 2012, approximately 974,000 mortgages have been 
modified through HAMP. Servicers and borrowers currently have 
until December 31, 2013, to modify mortgages through the 
program.
    CBO estimates that the committee's recommendation would 
prevent the Treasury from making payments for approximately 
150,000 new modifications of non-GSE mortgages assuming an 
October 1, 2012, effective date. (The cost of modifications 
entered into prior to enactment would continue to be paid by 
the Treasury.) Based on data provided by the Office of the 
Special Inspector General for the Troubled Asset Relief 
Program, CBO estimates that such modifications cost about 
$15,000 on average. As a result, CBO estimates that the 
provisions would reduce direct spending by $2.3 billion over 
the 2012-2022 period, assuming an October 1, 2012, effective 
date (or $2.8 billion assuming enactment by July 1, 2012).
    National Flood Insurance Program. Subtitle D would 
authorize the NFIP to enter into and renew flood insurance 
policies through fiscal year 2016. The committee's 
recommendations also would make a number of changes that would 
affect the financial status of the program, including: 
increasing premiums for some subsidized policyholders, offering 
temporary discounted premiums for properties that are newly 
mapped into a flood plain, and requiring the capitalization of 
a reserve fund for use during higher-than-average loss years.
    The changes made by the bill would improve the financial 
condition of the NFIP and reduce its need to borrow from the 
Treasury--a source of direct spending--by a total of $210 
million in 2014 and 2015, CBO estimates. Because the NFIP would 
continue to operate with insurance premiums that are not 
sufficient, in the aggregate, to cover all expected costs after 
the committee's recommendations were enacted, CBO estimates 
that reduced borrowing in 2014 and 2015 would be offset by 
increased borrowing in 2016 (when we expect the program would 
exhaust its remaining borrowing authority under this proposal), 
resulting in no net effect on direct spending over the next 10 
years.
    Section 507(b) of H. Con. Res. 112 requires that CBO 
estimate the change in net income to the NFIP if the 
committee's recommendations were enacted. CBO estimates that 
the proposed changes in subtitle D would increase net income to 
the NFIP by $4.9 billion over the 2012-2022 period (as shown in 
the memorandum to tables 1 and 2), mostly because of increases 
in premiums for subsidized policyholders (some of which would 
be retained by private insurers which sell the insurance 
policies). Increased premiums to the program would not result 
in a net reduction in CBO's estimate of the deficit, however, 
because we expect that this additional income would be used to 
fulfill obligations to policyholders that would otherwise be 
delayed, resulting in no net impact on direct spending over the 
five- and ten-year projection periods.
    Bureau of Consumer Financial Protection. The Dodd-Frank 
Wall Street Reform and Consumer Financial Protection Act 
established the Bureau of Consumer Financial Protection (CFPB) 
to enforce certain federal laws. The annual operating costs of 
the CFPB, an autonomous agency within the Federal Reserve, are 
paid through transfers from the earnings of the Federal Reserve 
and are recorded as expenditures in the federal budget. 
Subtitle C would change that funding mechanism by terminating 
the transfers from the Federal Reserve and authorizing the 
appropriation of $200 million for each of fiscal years 2012 and 
2013 for the agency's operations. CBO estimates that the CFPB 
will spend $310 million in fiscal year 2012, and that outlays 
will average about $545 million per year over the 2013-2022 
period.
    CBO estimates that enacting this change to the method of 
funding the agency would reduce direct spending by $5.4 billion 
over the 2012-2022 period, assuming enactment at any point 
between July 1, 2012, and October 1, 2012.
    Office of Financial Research. Subtitle E would eliminate 
the Office of Financial Research (OFR), which was established 
to support the Financial Stability Oversight Council (FSOC) by 
collecting information on financial markets and providing 
independent research on financial stability issues.
    Under current law, the OFR is authorized to collect fees to 
offset its expenses, which also include the operating costs of 
the FSOC and certain costs incurred by the FDIC to implement 
the orderly liquidation authority. Those fees are recorded in 
the budget as revenues. Subtitle E would terminate the 
authority to collect those fees as well as spending for all of 
the activities associated with the OFR. Based on information 
from the OFR, CBO estimates that spending by the OFR will 
average about $100 million per year over the 2013-2022 period, 
and that fee collections will average about $72 million per 
year over the same period, net of effects on payroll and income 
taxes.
    Thus, enacting this provision would reduce budget deficits 
by $255 million over the 2012-2022 period if enacted around 
October 1, 2012 (or $252 million if enacted by July 1, 2012), 
CBO estimates.

Spending subject to appropriation

    CBO estimates that implementing the committee 
recommendations would have a discretionary cost of $766 million 
over the 2013-2017 period, assuming appropriation of the 
necessary amounts, to fund activities of the CFPB and the FSOC, 
as well as mapping and mitigation efforts under the NFIP.
    Bureau of Consumer Financial Protection. Subtitle C would 
change the method for funding the CFPB. Under current law, the 
bureau's operating costs are covered by amounts transferred 
from the earnings of the Federal Reserve; the recommendation 
would terminate those transfers and authorize the appropriation 
of $200 million each year for 2012 and 2013.
    Based on information from the CFPB as well as historical 
spending patterns, CBO estimates that $325 million, an amount 
similar to what CBO estimates the agency will spend in 2012, 
would be sufficient for the CFPB to execute its statutory 
oversight and enforcement activities in 2013. CBO believes that 
the agency could not continue its mission with an appropriation 
of only $200 million in 2013, because the committee 
recommendations would not diminish the agency's 
responsibilities. Therefore, CBO estimates that implementing 
subtitle C would cost $325 million over the 2013-2017 period, 
assuming appropriation of the necessary amounts for 2013 and 
assuming enactment anytime between July 1, 2012, and October 1, 
2012.
    Financial Stability Oversight Council. Under current law, 
the activities of the FSOC are funded through the Office of 
Financial Research, which, as noted earlier, would be 
eliminated under subtitle E. Based on information from the OFR, 
CBO estimates that continuing the activities of the FSOC would 
cost about $10 million per year. Therefore, implementing 
subtitle E would cost $49 million over the 2013-2017 period, 
assuming appropriation of the necessary amounts and assuming 
enactment anytime between July 1, 2012, and October 1, 2012.
    Flood Mapping and Mitigation Programs. The committee 
recommendations would direct FEMA to implement new standards 
for flood insurance rate maps. The agency would have 10 years 
to incorporate the new standards, subject to the availability 
of appropriated funds. Based on the costs of FEMA's current map 
modernization program and the estimated costs of new updates, 
CBO estimates that implementing this provision would cost $254 
million over the next five years.
    Subtitle D also would authorize the appropriation of $40 
million a year above amounts already authorized in current law 
for grants to mitigate future flood damages. Such amounts would 
come from the National Flood Insurance Fund, but would be 
subject to future appropriation actions. Based on historical 
expenditure patterns of FEMA's flood mitigation programs, CBO 
estimates that implementing this provision would cost $138 
million over the next five years.
    Intergovernmental and private-sector impact: The 
legislation would impose intergovernmental and private-sector 
mandates, as defined in UMRA, on public and private mortgage 
lenders. Because the mandates would require only small changes 
in existing industry practice, CBO expects that the cost to 
comply with the mandates would be small relative to the annual 
thresholds established in UMRA for intergovernmental and 
private-sector mandates ($73 million and $146 million in 2012, 
respectively, adjusted annually for inflation).

Flood insurance

    Current law prohibits lenders from making loans for real 
estate in areas at high risk for flood damage unless the 
property is covered by flood insurance. This bill would require 
lenders to accept flood insurance from a private company if the 
policy fulfills all federal requirements for flood insurance. 
Under current law, lenders also are required to purchase flood 
insurance on behalf of the homeowner if, at any time during the 
life of a loan, they determine that a homeowner does not have a 
current policy in place. The bill would require lenders to 
terminate those policies within 30 days of being notified that 
the homeowner has purchased another policy. Lenders also would 
have to refund any premium payments and fees made by the 
homeowner for the time when both policies were in effect. Based 
on information from industry sources and on current industry 
practice, CBO estimates that the cost to public and private 
mortgage lenders of complying with those mandates would be 
small.

Disclosure requirements

    Current law requires mortgage lenders that make federally 
related mortgages (as defined in 12 U.S.C. 2602) to provide a 
good-faith estimate of the amount or range of charges the 
borrower is likely to incur for specific settlement services. 
The bill would require those lenders to include specific 
information about the availability of flood insurance in each 
good-faith estimate. The mandate would require small changes in 
existing disclosure requirements. Consequently, CBO estimates 
that the cost of the mandate to public and private mortgage 
lenders would be small.

Other impacts

    State, local, and tribal governments would benefit if funds 
authorized to be appropriated for mitigation and outreach 
activities related to flood hazards were made available. Any 
costs to those governments, including matching funds, would be 
incurred voluntarily.
    Previous CBO estimates: On March 11, 2011, CBO transmitted 
a cost estimate for H.R. 839, the HAMP Termination Act of 2011, 
as ordered reported by the House Committee on Financial 
Services on March 9, 2011. Differences in the estimated costs 
of subtitle B and H.R. 839 reflect differences in effective 
dates and administrative changes that have been made to the 
HAMP programs.
    On June 8, 2011, CBO transmitted a cost estimate for H.R. 
1309, the Flood Insurance Reform Modernization Act, as ordered 
reported by the House Committee on Financial Services on May 
13, 2011. Differences in the estimated costs of subtitle D and 
H.R. 1309 reflect differences in the effective dates as well as 
the requirement that the NFIP establish a reserve fund, which 
was included in the recommendation, but not in the committee-
reported version of H.R. 1309.
    Estimate prepared by: Federal Costs: Orderly Liquidation 
Authority and the NFIP: Daniel Hoople; Bureau of Consumer 
Financial Protection and Office of Financial Research: Susan 
Willie; Home Affordable Modification Program: Chad Chirico.
    Impact on State, local, and tribal governments: Elizabeth 
Cove Delisle and Melissa Merrell.
    Impact on the private sector: Vi Nguyen and Paige Piper/
Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Section 346 of Subtitle D creates a new Technical Mapping 
Advisory Council within the meaning of section 5(b) of the 
Federal Advisory Committee Act.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
Subtitle.

                  Applicability to Legislative Branch


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    The Committee finds that Subtitle A does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    The Committee finds that Subtitle B does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    The Committee finds that Subtitle C does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    The Committee finds that Subtitle D does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    The Committee finds that Subtitle E does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of the section 102(b)(3) 
of the Congressional Accountability Act.

                         Earmark Identification


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

    Subtitle A does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

    Subtitle B does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

    Subtitle C does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                   SUBTITLE D--FLOOD INSURANCE REFORM

    Subtitle D does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

    Subtitle E does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


                  SUBTITLE A--ORDERLY LIQUIDATION FUND

Section 311. Repeal of Liquidation Authority

    Section 311 repeals Title II of the Dodd-Frank Act, and 
makes conforming amendments to the Dodd-Frank Act and the 
Federal Deposit Insurance Act.

            SUBTITLE B--HOME AFFORDABLE MODIFICATION PROGRAM

Section 321. Short title

    This section establishes the short title of the Subtitle, 
the ``The HAMP Termination Act of 2012.''

Section 322. Congressional findings

    This section sets forth several Congressional findings 
regarding HAMP, including the purpose of the program, the 
number of active permanent mortgage modifications made under 
the program, the harms sustained by homeowners as a result of 
HAMP modification cancellations, the cost of the program, and 
the savings that will be achieved by terminating the program.

Section 323. Termination of authority

    This section amends Section 120 of the Emergency Economic 
Stabilization Act of 2008 to terminate the authority of the 
Treasury Department to provide new assistance to homeowners 
under the HAMP. It also preserves the Treasury Department's 
authority to continue to provide assistance to homeowners who 
have already been extended an offer to participate in HAMP on a 
permanent or trial basis.
    Further, this section directs the Treasury Secretary to 
conduct a study to determine the extent to which ``covered 
homeowners'' use HAMP. ``Covered homeowners'' are defined as 
individuals who are active duty members of the U.S. armed 
forces and their spouses or parents, veterans of the U.S. armed 
forces, and individuals eligible to receive a Gold Star lapel 
button under 10 U.S.C. 1126 as the widow, parent, or next of 
kin of a fallen member of the U.S. armed forces. The Treasury 
Secretary is then required to report to Congress on the study 
and to identify any best practices that could be applied to 
existing mortgage assistance programs available to covered 
homeowners within 90 days of enactment of this Subtitle.
    Finally, this section requires the Treasury Secretary to 
publish in a prominent location on the Treasury Department's 
website, in a noticeable font, a statement that HAMP has been 
terminated and inviting borrowers who are having trouble paying 
their mortgages and who need help in communicating with their 
lenders or servicers to contact their Member of Congress for 
assistance in reaching the lender or servicer for the purpose 
of negotiating or acquiring a loan modification.

Section 324. Sense of Congress

    This section establishes the sense of Congress that banks 
should be encouraged to work with homeowners to provide loan 
modifications to those that are eligible, as well as to work 
and to assist homeowners and prospective homeowners with 
foreclosure prevention programs and information on loan 
modifications.

          SUBTITLE C--BUREAU OF CONSUMER FINANCIAL PROTECTION

Section 331. Bringing the Bureau of Consumer Financial Protection into 
        the regular appropriations process

    Section 331 amends Section 1017 of the Dodd-Frank Act by 
terminating the CFPB's authority to determine its own budget 
and draw that amount from the Federal Reserve System. This 
section authorizes $200 million in appropriations to fund the 
CFPB for fiscal years 2012 and 2013. This section also 
eliminates the Consumer Financial Protection Fund and the 
Consumer Financial Civil Penalty Fund.

                   SUBTITLE D--FLOOD INSURANCE REFORM

Section 341. Short title and Table of Contents

    This section establishes the short title of the Subtitle, 
the ``Flood Insurance Reform Act of 2012.''

Section 342. Extensions

    This section reauthorizes the NFIP and its financing 
through September 30, 2016.

Section 343. Mandatory purchase

    Temporary Mandatory Purchase Suspensions--Under the NFIP, 
federally regulated lenders are obligated to require flood 
insurance on any mortgage issued or guaranteed by the federal 
government in a Special Flood Hazard Area in a community that 
participates in the NFIP. This section allows the mandatory 
purchase requirement to be suspended on a community-by-
community basis for one year at the request of a local 
governing authority if FEMA finds at least one of the following 
conditions apply to the community: (1) it has never been mapped 
as a high-risk area; (2) it is taking specific steps to rebuild 
or repair a dam or levee that has been decertified and is 
making adequate progress in securing financial commitments and 
completing that work; or (3) it has filed a formal appeal of 
the accuracy of a dam or levee decertification or flood risk 
map revision. This suspension could be extended for a maximum 
of two additional one-year periods (for a total of three years) 
for all qualifying communities at FEMA's discretion. For 
certain qualifying communities determined by FEMA to be making 
more than adequate progress in the construction of their flood 
protection systems, FEMA may, at its discretion, further extend 
the suspension of the mandatory purchase requirement for 
existing mortgages for a maximum of two additional one-year 
periods (for a total of five years).
    Termination of Force-Placed Insurance--Mortgage lenders and 
servicers must terminate any force-placed insurance and refund 
any premiums paid for coverage overlap periods once property 
owners have obtained their required flood insurance.
    Equal Treatment of Private Flood Insurance--To encourage 
greater private sector participation, this section requires 
lenders to accept non-NFIP backed flood insurance coverage 
provided by a private entity if that coverage meets the same 
requirements as NFIP-backed flood insurance.

Section 344. Reforms of coverage terms

    Minimum Deductibles--Minimum deductibles are set at $1,000 
for properties with full-risk rates and at $2,000 for 
properties with discounted rates.
    Maximum Coverage Limits--Limits would be indexed for 
inflation, starting in 2012.
    Optional Coverage for Additional Living Expenses/Business 
Interruption (ALE/BI)--FEMA would be authorized to offer 
optional coverage for additional living expenses ($5,000 
maximum) and coverage for the interruption of business 
operations ($20,000 maximum) if FEMA: (1) charges full-risk 
rates for such coverage; (2) finds that a competitive private 
market for such coverage does not exist; and (3) certifies that 
the NFIP can offer such coverage without borrowing additional 
funds from the Treasury.
    Installment Payments--Policyholders would be allowed to pay 
their premiums for one-year policies in installments.
    Flood in Progress Protections--New policyholders would not 
have their coverage limited by a FEMA-determined flood-in-
progress exclusion if they have not sustained any actual damage 
or loss to their property within the initial 30-day waiting 
period required under a standard flood insurance policy before 
flood coverage can go into effect.

Section 345. Reforms of premium rates

    Annual Limit on Premium Rate Increases--The annual cap on 
premium rate increases would be increased from 10 percent to 20 
percent.
    Five Year Phase-in of Full-Risk Rates for Newly-Mapped 
Areas--For primary residence properties mapped into a mandatory 
purchase area, initial rates would be set at 20 percent of 
full-risk rates and increase by 20 percent each year for four 
years thereafter.
    Full-Risk Rates for Certain Subsidized Properties--Full 
actuarial rates would be phased-in for roughly 350,000 
properties currently receiving NFIP subsidies including: 
commercial properties, second and vacation homes, homes sold to 
new owners, homes substantially damaged or improved, Severe 
Repetitive Loss Properties (SRLPs) with multiple flood claims, 
and property owners who allowed their policies to lapse by 
choice.
    Use of State and Local Funding Considerations in Setting 
Flood Rates--FEMA would be required to update its standards for 
evaluating eligibility for special flood insurance rates by 
considering several factors, including state and local funding 
of flood control projects and other flood control 
reconstruction and improvement projects.

Section 346. Technical Mapping Advisory Council

    This section establishes a new Technical Mapping Advisory 
Council made up of federal, state, and local experts, with an 
adequate number of representatives from states at a high-risk 
for flooding, to review flood hazard risk mapping standards and 
propose new mapping standards to FEMA. The Council has 12 
months to develop and submit to FEMA and Congress its proposed 
new mapping standards, during which time FEMA is prohibited 
from making effective any new or updated flood insurance rate 
maps based on its current mapping standards.

Section 347. FEMA incorporation of New Mapping Protocols

    This section requires FEMA to update its flood maps 
according to the Technical Mapping Advisory Council's 
recommendations within six months of receiving those 
recommendations, or report to Congress why it rejected them.

Section 348. Treatment of levees

    This section prohibits FEMA from issuing or updating flood 
insurance maps that do not factor in the actual protection 
afforded by existing levees regardless of their FEMA 
accreditation status (i.e., FEMA's maps must award partial 
credit to existing dams and levees).

Section 349. Privatization initiatives

    This section requires FEMA and the GAO to report on various 
privatization initiatives, including options to begin 
privatizing the NFIP over time; determining the capacity of 
private insurers, reinsurers, and financial markets to 
underwrite NFIP flood risk; and assessing new ways to 
strengthen the NFIP's ability to pay claims without having to 
borrow from the Treasury.

Section 350. FEMA annual report on insurance program

    This section requires FEMA to report annually to Congress 
on the status of the NFIP with detailed information about the 
financial status of the program.

Section 351. Mitigation assistance

    This section amends the current planning assistance grants 
program to authorize $90 million in financial assistance for 
FEMA to (1) make assistance grants available to states and 
communities for flood mitigation activities, particularly 
activities that reduce flood damage to severe repetitive loss 
structures; and (2) make direct grants available to property 
owners for flood mitigation activities. To become eligible for 
mitigation assistance, states must develop a new multi-hazard 
mitigation plan that examines the reduction of flood losses, 
including the demolition and rebuilding of properties, and 
requires states and communities to use mitigation assistance in 
a manner that is consistent with activities outlined in their 
mitigation plan. In awarding grants, FEMA may approve only 
mitigation activities that it determines are technically 
feasible, cost-effective and represent savings to the NFIP, 
with a priority given to mitigation activities that will result 
in savings for the NFIP.

Section 352. Notification to homeowners regarding mandatory purchase 
        requirement applicability and rate phase-ins

    This section establishes an annual notification process to 
inform individuals who reside in an area having special flood 
hazards that they are subject to the mandatory purchase 
requirement and provide estimates of what other homeowners in 
similar areas pay for their flood insurance.

Section 353. Notification of Congress regarding the establishment of 
        flood map changes

    This section requires FEMA to notify Members of the House 
and Senate whose districts or states are affected when it 
changes or updates floodplain areas or flood risk zones.

Section 354. Notification and appeals process for map changes based on 
        flood elevations

    This section requires FEMA, when establishing new flood 
maps based on elevation, to provide written notification by 
first class mail of the proposed change and the appeals process 
to each effected property owner with, copies of the new maps to 
the chief executive officer of each community affected, and to 
publish notice of the proposed change and the appeals process 
in the Federal Register and a prominent local newspaper.

Section 355. Notification to tenants of the availability of contents 
        insurance

    This section requires FEMA to develop a notice to landlords 
to inform tenants if they live in an area having special flood 
hazards and details about NFIP insurance for the contents of 
their apartment.

Section 356. Notification to policy holders regarding direct management 
        of policy by FEMA

    This section requires FEMA to annually notify all holders 
of policies transferred to the NFIP Direct program of their 
options to purchase flood insurance directly from another WYO 
insurance company.

Section 357--Notice of the availability of flood insurance and escrow 
        in RESPA good faith estimate

    This section amends the Real Estate Settlement Procedures 
Act (RESPA) to disclose as part of RESPA's good faith estimate 
that flood insurance is generally available from the NFIP for 
all homes, and that the escrowing of flood insurance payments 
is required for many loans and may be an option available under 
other loans.

Section 358--Reimbursement for costs incurred by homeowners and 
        communities obtaining letters of map amendment or revision

    This section allows homeowners or communities to be 
reimbursed for certain costs associated with a successful 
challenge to a bona fide mapping error made by FEMA resulting 
in a Letter of Map Amendment (LOMA) or Letter of Map Revision 
(LOMR), not including legal fees.

Section 359--Enhanced communication to communities with non-updated 
        flood maps

    This section requires FEMA, when establishing new flood 
maps, to communicate with communities whose flood insurance 
rate maps that have not been updated in 20 or more years to 
help resolve outstanding flooding issues, provide technical 
assistance, and disseminate information to reduce the 
prevalence of outdated maps in flood-prone areas.

Section 360--Notification to residents newly included in flood hazard 
        areas

    This section requires FEMA to provide to each property 
owner newly mapped into a special flood hazard area with a copy 
of the revised or updated flood insurance map that affects that 
owner's property, as well as the appeals process to challenge 
that mapping determination.

Section 361--Treatment of swimming pool enclosures outside of hurricane 
        season

    This section allows certain properties with swimming pools 
that are enclosed with non-supporting breakaway walls outside 
of hurricane season (November 20 through June 1) to be eligible 
for participation in the NFIP.

Section 362--Information regarding multiple perils claims

    This section allows NFIP policyholders who also have non-
NFIP wind or other homeowners insurance coverage and sustain 
damage to property covered under both policies to request the 
damage estimate, proofs of loss, and any expert or engineering 
reports used to determine the cause of the damage from FEMA and 
their NFIP-participating WYO insurance company.

Section 363--FEMA authority to reject the transfer of policies to NFIP 
        direct

    This section authorizes FEMA to refuse to accept the future 
transfer of any flood insurance policies from a WYO company to 
its NFIP Direct policy servicing program.

Section 364--Media notification of proposed map changes and extended 
        appeals process

    This section requires FEMA to notify local television and 
radio stations of proposed changes to flood maps. This section 
also requires FEMA to grant property owners a 90-day extension 
of the existing appeals process period if their community 
certifies to FEMA that there are affected property owners who 
were unaware of the expiration of the appeals process period 
and that the community will use that 90-day period to inform 
affected property owners about the availability of the appeals 
process.

Section 365--Establishment of a Reserve Fund for the NFIP

    This section establishes a National Flood Insurance Reserve 
Fund within the Treasury Department where the NFIP would be 
required to maintain a reserve ratio balance of at least 1 
percent of the sum of the total potential loss exposure of all 
outstanding flood insurance policies in force the prior fiscal 
year. FEMA is authorized to establish and adjust the amount of 
aggregate annual insurance premiums it collects to maintain or 
achieve that reserve ratio. Starting in 2012, FEMA would be 
required to transfer to the Fund at least 7.5 percent of the 
amount needed to achieve its 1 percent reserve ratio balance 
each year until the full 1 percent reserve ratio is achieved. 
FEMA would also be required to submit a report to Congress for 
any year in which it cannot achieve a 1 percent reserve ratio.

Section 366--CDBG eligibility for flood insurance outreach activities 
        and community building code administration grants

    This section allows communities to use Community 
Development Block Grant (CDBG) funds for local building code 
enforcement, as long as local matching funds are provided. It 
also allows CDBG funds to be used by local governments for 
flood risk outreach and education activities.

Section 367--Technical corrections

    This section makes a technical correction to the underlying 
National Flood Insurance Act of 1968 and the Flood Disaster 
Protection Act of 1973 to update references in those statutes 
to the head of FEMA as its ``Administrator'' rather than its 
``Director.''

Section 368--Requiring competition for NFIP policies

    To address the rapid increase in the number of policies 
administered under FEMA's NFIP Direct policy servicing program, 
FEMA would be required to report to Congress within 90 days on 
the procedures and policies it can implement to limit the size 
of NFIP Direct to no more than 10 percent of all flood 
insurance policies, and then implement those size reduction 
procedures and policies--without preventing agents handling 
policies transitioned out of the NFIP Direct from continuing to 
sell or service those policies--within one year of issuing that 
report.

Section 369--Studies of voluntary community-based flood insurance 
        options

    This section directs FEMA and GAO to conduct a study to 
assess options, methods, and strategies for offering voluntary 
community-based flood insurance policies, and to report their 
findings to Congress within 18 months of enactment of this 
subtitle.

Section 370--Report on inclusion of building codes in floodplain 
        management criteria

    This section directs FEMA to study the impact, 
effectiveness, and feasibility of including widely used and 
nationally recognized building codes as part of its floodplain 
management criteria, and report its findings to Congress within 
6 months of enactment of this subtitle.

Section 371--Study on graduated risk

    This section requires the National Academy of Sciences to 
study methods for understanding graduated risk for properties 
and residential and commercial structures behind levees and 
report its findings to Congress within one year of enactment of 
this subtitle.

Section 372--Report on flood-in-progress determination

    This section directs FEMA to review its processes and 
procedures for issuing a flood-in-progress determination and 
providing public notification of that determination, and report 
the results of that review to Congress within 6 months of 
enactment of this subtitle.

Section 373--Study on Repaying flood insurance debt

    This section requires FEMA to report to Congress within 6 
months of enactment of this subtitle on its plan to repay all 
outstanding sums previously borrowed from the Treasury, with 
interest, over the next 10 years.

Section 374--No cause of action

    This section specifies that no cause of action against the 
federal government exists for failure to comply with any 
notification requirement under this Act.

Section 375--State and local requests for the Corps of Engineers to 
        evaluate Corps-constructed levees

    This section permits state and local governments to request 
the Army Corps of Engineers to evaluate their locally-operated 
levee systems, provided that the levee was constructed by the 
Corps and that the requesting state or local government agrees 
to fully reimburse the Corps for all costs associated with the 
evaluation.

                SUBTITLE E--OFFICE OF FINANCIAL RESEARCH

Section 381. Repeal of the Office of Financial Research

    Section 381 repeals Title I, Subtitle B of the Dodd-Frank 
Act, which establishes the OFR as an office within the 
Department of the Treasury.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

       DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT


SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) * * *
  (b) Table of Contents.--The table of contents for this Act is 
as follows:

Sec. 1. Short title; table of contents.
     * * * * * * *

                      TITLE I--FINANCIAL STABILITY

     * * * * * * *

            Subtitle A--Financial Stability Oversight Council

     * * * * * * *
[Sec. 118. Council funding.]
     * * * * * * *

                [Subtitle B--Office of Financial Research

[Sec. 151. Definitions.
[Sec. 152. Office of Financial Research established.
[Sec. 153. Purpose and duties of the Office.
[Sec. 154. Organizational structure; responsibilities of primary 
          programmatic units.
[Sec. 155. Funding.
[Sec. 156. Transition oversight.]
     * * * * * * *

                [TITLE II--ORDERLY LIQUIDATION AUTHORITY

[Sec. 201. Definitions.
[Sec. 202. Judicial review.
[Sec. 203. Systemic risk determination.
[Sec. 204. Orderly liquidation of covered financial companies.
[Sec. 205. Orderly liquidation of covered brokers and dealers.
[Sec. 206. Mandatory terms and conditions for all orderly liquidation 
          actions.
[Sec. 207. Directors not liable for acquiescing in appointment of 
          receiver.
[Sec. 208. Dismissal and exclusion of other actions.
[Sec. 209. Rulemaking; non-conflicting law.
[Sec. 210. Powers and duties of the Corporation.
[Sec. 211. Miscellaneous provisions.
[Sec. 212. Prohibition of circumvention and prevention of conflicts of 
          interest.
[Sec. 213. Ban on certain activities by senior executives and directors.
[Sec. 214. Prohibition on taxpayer funding.
[Sec. 215. Study on secured creditor haircuts.
[Sec. 216. Study on bankruptcy process for financial and nonbank 
          financial institutions
[Sec. 217. Study on international coordination relating to bankruptcy 
          process for nonbank financial institutions]

           *       *       *       *       *       *       *


TITLE I--FINANCIAL STABILITY

           *       *       *       *       *       *       *


SEC. 102. DEFINITIONS.

  (a) In General.--For purposes of this title, unless the 
context otherwise requires, the following definitions shall 
apply:
          (1) * * *

           *       *       *       *       *       *       *

          [(5) Office of financial research.--The term ``Office 
        of Financial Research'' means the office established 
        under section 152.]

           *       *       *       *       *       *       *


           Subtitle A--Financial Stability Oversight Council

SEC. 111. FINANCIAL STABILITY OVERSIGHT COUNCIL ESTABLISHED.

  (a) * * *
  (b) Membership.--The Council shall consist of the following 
members:
          (1) * * *
          (2) Nonvoting members.--The nonvoting members, who 
        shall serve in an advisory capacity as a nonvoting 
        member of the Council, shall be--
                  [(A) the Director of the Office of Financial 
                Research;]
                  [(B)] (A) the Director of the Federal 
                Insurance Office;
                  [(C)] (B) a State insurance commissioner, to 
                be designated by a selection process determined 
                by the State insurance commissioners;
                  [(D)] (C) a State banking supervisor, to be 
                designated by a selection process determined by 
                the State banking supervisors; and
                  [(E)] (D) a State securities commissioner (or 
                an officer performing like functions), to be 
                designated by a selection process determined by 
                such State securities commissioners.

           *       *       *       *       *       *       *

  (c) Terms; Vacancy.--
          (1) Terms.--The independent member of the Council 
        shall serve for a term of 6 years, and each nonvoting 
        member described in [subparagraphs (C), (D), and (E)] 
        subparagraphs (B), (C), and (D) of subsection (b)(2) 
        shall serve for a term of 2 years.

           *       *       *       *       *       *       *


SEC. 112. COUNCIL AUTHORITY.

  (a) Purposes and Duties of the Council.--
          (1) * * *
          (2) Duties.--The Council shall, in accordance with 
        this title--
                  (A) collect information from member agencies, 
                other Federal and State financial regulatory 
                agencies, the Federal Insurance Office and, if 
                necessary to assess risks to the United States 
                financial system, [direct the Office of 
                Financial Research to] collect information from 
                bank holding companies and nonbank financial 
                companies;
                  [(B) provide direction to, and request data 
                and analyses from, the Office of Financial 
                Research to support the work of the Council;]
                  [(C)] (B) monitor the financial services 
                marketplace in order to identify potential 
                threats to the financial stability of the 
                United States;
                  [(D)] (C) to monitor domestic and 
                international financial regulatory proposals 
                and developments, including insurance and 
                accounting issues, and to advise Congress and 
                make recommendations in such areas that will 
                enhance the integrity, efficiency, 
                competitiveness, and stability of the U.S. 
                financial markets;
                  [(E)] (D) facilitate information sharing and 
                coordination among the member agencies and 
                other Federal and State agencies regarding 
                domestic financial services policy development, 
                rulemaking, examinations, reporting 
                requirements, and enforcement actions;
                  [(F)] (E) recommend to the member agencies 
                general supervisory priorities and principles 
                reflecting the outcome of discussions among the 
                member agencies;
                  [(G)] (F) identify gaps in regulation that 
                could pose risks to the financial stability of 
                the United States;
                  [(H)] (G) require supervision by the Board of 
                Governors for nonbank financial companies that 
                may pose risks to the financial stability of 
                the United States in the event of their 
                material financial distress or failure, or 
                because of their activities pursuant to section 
                113;
                  [(I)] (H) make recommendations to the Board 
                of Governors concerning the establishment of 
                heightened prudential standards for risk-based 
                capital, leverage, liquidity, contingent 
                capital, resolution plans and credit exposure 
                reports, concentration limits, enhanced public 
                disclosures, and overall risk management for 
                nonbank financial companies and large, 
                interconnected bank holding companies 
                supervised by the Board of Governors;
                  [(J)] (I) identify systemically important 
                financial market utilities and payment, 
                clearing, and settlement activities (as that 
                term is defined in title VIII);
                  [(K)] (J) make recommendations to primary 
                financial regulatory agencies to apply new or 
                heightened standards and safeguards for 
                financial activities or practices that could 
                create or increase risks of significant 
                liquidity, credit, or other problems spreading 
                among bank holding companies, nonbank financial 
                companies, and United States financial markets;
                  [(L)] (K) review and, as appropriate, may 
                submit comments to the Commission and any 
                standard-setting body with respect to an 
                existing or proposed accounting principle, 
                standard, or procedure;
                  [(M)] (L) provide a forum for--
                          (i) * * *

           *       *       *       *       *       *       *

                  [(N)] (M) annually report to and testify 
                before Congress on--
                          (i) * * *

           *       *       *       *       *       *       *

  (d) Authority To Obtain Information.--
          (1) In general.--The Council may receive, and may 
        request the submission of, any data or information from 
        [the Office of Financial Research, member agencies, 
        and] member agencies and the Federal Insurance Office, 
        as necessary--
                  (A) * * *

           *       *       *       *       *       *       *

          (2) Submissions by the office and member agencies.--
        Notwithstanding any other provision of law, [the Office 
        of Financial Research, any member agency, and] any 
        member agency and the Federal Insurance Office, are 
        authorized to submit information to the Council.
          (3) Financial data collection.--
                  (A) In general.--The Council [, acting 
                through the Office of Financial Research,] may 
                require the submission of periodic and other 
                reports from any nonbank financial company or 
                bank holding company for the purpose of 
                assessing the extent to which a financial 
                activity or financial market in which the 
                nonbank financial company or bank holding 
                company participates, or the nonbank financial 
                company or bank holding company itself, poses a 
                threat to the financial stability of the United 
                States.
                  (B) Mitigation of report burden.--Before 
                requiring the submission of reports from any 
                nonbank financial company or bank holding 
                company that is regulated by a member agency or 
                any primary financial regulatory agency, the 
                Council[, acting through the Office of 
                Financial Research,] shall coordinate with such 
                agencies and shall, whenever possible, rely on 
                information available from [the Office of 
                Financial Research or] such agencies.
                  (C) Mitigation in case of foreign financial 
                companies.--Before requiring the submission of 
                reports from a company that is a foreign 
                nonbank financial company or foreign-based bank 
                holding company, the Council shall[, acting 
                through the Office of Financial Research,] to 
                the extent appropriate, consult with the 
                appropriate foreign regulator of such company 
                and, whenever possible, rely on information 
                already being collected by such foreign 
                regulator, with English translation.

           *       *       *       *       *       *       *

          (5) Confidentiality.--
                  (A) In general.--The Council[, the Office of 
                Financial Research,] and the other member 
                agencies shall maintain the confidentiality of 
                any data, information, and reports submitted 
                under this title.

           *       *       *       *       *       *       *


SEC. 116. REPORTS.

  (a) In General.--Subject to subsection (b), the Council[, 
acting through the Office of Financial Research,] may require a 
bank holding company with total consolidated assets of 
$50,000,000,000 or greater or a nonbank financial company 
supervised by the Board of Governors, and any subsidiary 
thereof, to submit certified reports to keep the Council 
informed as to--
          (1) * * *

           *       *       *       *       *       *       *

  (b) Use of Existing Reports.--
          (1) In general.--For purposes of compliance with 
        subsection (a), the Council[, acting through the Office 
        of Financial Research,] shall, to the fullest extent 
        possible, use--
                  (A) * * *

           *       *       *       *       *       *       *


[SEC. 118. COUNCIL FUNDING.

  [Any expenses of the Council shall be treated as expenses of, 
and paid by, the Office of Financial Research.]

           *       *       *       *       *       *       *


               [Subtitle B--Office of Financial Research

[SEC. 151. DEFINITIONS.

  [For purposes of this subtitle--
          [(1) the terms ``Office'' and ``Director'' mean the 
        Office of Financial Research established under this 
        subtitle and the Director thereof, respectively;
          [(2) the term ``financial company'' has the same 
        meaning as in title II, and includes an insured 
        depository institution and an insurance company;
          [(3) the term ``Data Center'' means the data center 
        established under section 154;
          [(4) the term ``Research and Analysis Center'' means 
        the research and analysis center established under 
        section 154;
          [(5) the term ``financial transaction data'' means 
        the structure and legal description of a financial 
        contract, with sufficient detail to describe the rights 
        and obligations between counterparties and make 
        possible an independent valuation;
          [(6) the term ``position data''--
                  [(A) means data on financial assets or 
                liabilities held on the balance sheet of a 
                financial company, where positions are created 
                or changed by the execution of a financial 
                transaction; and
                  [(B) includes information that identifies 
                counterparties, the valuation by the financial 
                company of the position, and information that 
                makes possible an independent valuation of the 
                position;
          [(7) the term ``financial contract'' means a legally 
        binding agreement between 2 or more counterparties, 
        describing rights and obligations relating to the 
        future delivery of items of intrinsic or extrinsic 
        value among the counterparties; and
          [(8) the term ``financial instrument'' means a 
        financial contract in which the terms and conditions 
        are publicly available, and the roles of one or more of 
        the counterparties are assignable without the consent 
        of any of the other counterparties (including common 
        stock of a publicly traded company, government bonds, 
        or exchange traded futures and options contracts).

[SEC. 152. OFFICE OF FINANCIAL RESEARCH ESTABLISHED.

  [(a) Establishment.--There is established within the 
Department of the Treasury the Office of Financial Research.
  [(b) Director.--
          [(1) In general.--The Office shall be headed by a 
        Director, who shall be appointed by the President, by 
        and with the advice and consent of the Senate.
          [(2) Term of service.--The Director shall serve for a 
        term of 6 years, except that, in the event that a 
        successor is not nominated and confirmed by the end of 
        the term of service of a Director, the Director may 
        continue to serve until such time as the next Director 
        is appointed and confirmed.
          [(3) Executive level.--The Director shall be 
        compensated at Level III of the Executive Schedule.
          [(4) Prohibition on dual service.--The individual 
        serving in the position of Director may not, during 
        such service, also serve as the head of any financial 
        regulatory agency.
          [(5) Responsibilities, duties, and authority.--The 
        Director shall have sole discretion in the manner in 
        which the Director fulfills the responsibilities and 
        duties and exercises the authorities described in this 
        subtitle.
  [(c) Budget.--The Director, in consultation with the 
Chairperson, shall establish the annual budget of the Office.
  [(d) Office Personnel.--
          [(1) In general.--The Director, in consultation with 
        the Chairperson, may fix the number of, and appoint and 
        direct, all employees of the Office.
          [(2) Compensation.--The Director, in consultation 
        with the Chairperson, shall fix, adjust, and administer 
        the pay for all employees of the Office, without regard 
        to chapter 51 or subchapter III of chapter 53 of title 
        5, United States Code, relating to classification of 
        positions and General Schedule pay rates.
          [(3) Comparability.--Section 1206(a) of the Financial 
        Institutions Reform, Recovery, and Enforcement Act of 
        1989 (12 U.S.C. 1833b(a)) is amended--
                  [(A) by striking ``Finance Board,'' and 
                inserting ``Finance Board, the Office of 
                Financial Research, and the Bureau of Consumer 
                Financial Protection''; and
                  [(B) by striking ``and the Office of Thrift 
                Supervision,''.
          [(4) Senior executives.--Section 3132(a)(1)(D) of 
        title 5, United States Code, is amended by striking 
        ``and the National Credit Union Administration;'' and 
        inserting ``the National Credit Union Administration, 
        the Bureau of Consumer Financial Protection, and the 
        Office of Financial Research;''.
  [(e) Assistance From Federal Agencies.--Any department or 
agency of the United States may provide to the Office and any 
special advisory, technical, or professional committees 
appointed by the Office, such services, funds, facilities, 
staff, and other support services as the Office may determine 
advisable. Any Federal Government employee may be detailed to 
the Office without reimbursement, and such detail shall be 
without interruption or loss of civil service status or 
privilege.
  [(f) Procurement of Temporary and Intermittent Services.--The 
Director may procure temporary and intermittent services under 
section 3109(b) of title 5, United States Code, at rates for 
individuals which do not exceed the daily equivalent of the 
annual rate of basic pay prescribed for Level V of the 
Executive Schedule under section 5316 of such title.
  [(g) Post-employment Prohibitions.--The Secretary, with the 
concurrence of the Director of the Office of Government Ethics, 
shall issue regulations prohibiting the Director and any 
employee of the Office who has had access to the transaction or 
position data maintained by the Data Center or other business 
confidential information about financial entities required to 
report to the Office from being employed by or providing advice 
or consulting services to a financial company, for a period of 
1 year after last having had access in the course of official 
duties to such transaction or position data or business 
confidential information, regardless of whether that entity is 
required to report to the Office. For employees whose access to 
business confidential information was limited, the regulations 
may provide, on a case-by-case basis, for a shorter period of 
post-employment prohibition, provided that the shorter period 
does not compromise business confidential information.
  [(h) Technical and Professional Advisory Committees.--The 
Office, in consultation with the Chairperson, may appoint such 
special advisory, technical, or professional committees as may 
be useful in carrying out the functions of the Office, and the 
members of such committees may be staff of the Office, or other 
persons, or both.
  [(i) Fellowship Program.--The Office, in consultation with 
the Chairperson, may establish and maintain an academic and 
professional fellowship program, under which qualified 
academics and professionals shall be invited to spend not 
longer than 2 years at the Office, to perform research and to 
provide advanced training for Office personnel.
  [(j) Executive Schedule Compensation.--Section 5314 of title 
5, United States Code, is amended by adding at the end the 
following new item:Director of the Office of Financial 
Research.''.

[SEC. 153. PURPOSE AND DUTIES OF THE OFFICE.

  [(a) Purpose and Duties.--The purpose of the Office is to 
support the Council in fulfilling the purposes and duties of 
the Council, as set forth in subtitle A, and to support member 
agencies, by--
          [(1) collecting data on behalf of the Council, and 
        providing such data to the Council and member agencies;
          [(2) standardizing the types and formats of data 
        reported and collected;
          [(3) performing applied research and essential long-
        term research;
          [(4) developing tools for risk measurement and 
        monitoring;
          [(5) performing other related services;
          [(6) making the results of the activities of the 
        Office available to financial regulatory agencies; and
          [(7) assisting such member agencies in determining 
        the types and formats of data authorized by this Act to 
        be collected by such member agencies.
  [(b) Administrative Authority.--The Office may--
          [(1) share data and information, including software 
        developed by the Office, with the Council, member 
        agencies, and the Bureau of Economic Analysis, which 
        shared data, information, and software--
                  [(A) shall be maintained with at least the 
                same level of security as is used by the 
                Office; and
                  [(B) may not be shared with any individual or 
                entity without the permission of the Council;
          [(2) sponsor and conduct research projects; and
          [(3) assist, on a reimbursable basis, with financial 
        analyses undertaken at the request of other Federal 
        agencies that are not member agencies.
  [(c) Rulemaking Authority.--
          [(1) Scope.--The Office, in consultation with the 
        Chairperson, shall issue rules, regulations, and orders 
        only to the extent necessary to carry out the purposes 
        and duties described in paragraphs (1), (2), and (7) of 
        subsection (a).
          [(2) Standardization.--Member agencies, in 
        consultation with the Office, shall implement 
        regulations promulgated by the Office under paragraph 
        (1) to standardize the types and formats of data 
        reported and collected on behalf of the Council, as 
        described in subsection (a)(2). If a member agency 
        fails to implement such regulations prior to the 
        expiration of the 3-year period following the date of 
        publication of final regulations, the Office, in 
        consultation with the Chairperson, may implement such 
        regulations with respect to the financial entities 
        under the jurisdiction of the member agency. This 
        paragraph shall not supersede or interfere with the 
        independent authority of a member agency under other 
        law to collect data, in such format and manner as the 
        member agency requires.
  [(d) Testimony.--
          [(1) In general.--The Director of the Office shall 
        report to and testify before the Committee on Banking, 
        Housing, and Urban Affairs of the Senate and the 
        Committee on Financial Services of the House of 
        Representatives annually on the activities of the 
        Office, including the work of the Data Center and the 
        Research and Analysis Center, and the assessment of the 
        Office of significant financial market developments and 
        potential emerging threats to the financial stability 
        of the United States.
          [(2) No prior review.--No officer or agency of the 
        United States shall have any authority to require the 
        Director to submit the testimony required under 
        paragraph (1) or other congressional testimony to any 
        officer or agency of the United States for approval, 
        comment, or review prior to the submission of such 
        testimony. Any such testimony to Congress shall include 
        a statement that the views expressed therein are those 
        of the Director and do not necessarily represent the 
        views of the President.
  [(e) Additional Reports.--The Director may provide additional 
reports to Congress concerning the financial stability of the 
United States. The Director shall notify the Council of any 
such additional reports provided to Congress.
  [(f) Subpoena.--
          [(1) In general.--The Director may require from a 
        financial company, by subpoena, the production of the 
        data requested under subsection (a)(1) and section 
        154(b)(1), but only upon a written finding by the 
        Director that--
                  [(A) such data is required to carry out the 
                functions described under this subtitle; and
                  [(B) the Office has coordinated with the 
                relevant primary financial regulatory agency, 
                as required under section 154(b)(1)(B)(ii).
          [(2) Format.--Subpoenas under paragraph (1) shall 
        bear the signature of the Director, and shall be served 
        by any person or class of persons designated by the 
        Director for that purpose.
          [(3) Enforcement.--In the case of contumacy or 
        failure to obey a subpoena, the subpoena shall be 
        enforceable by order of any appropriate district court 
        of the United States. Any failure to obey the order of 
        the court may be punished by the court as a contempt of 
        court.

[SEC. 154. ORGANIZATIONAL STRUCTURE; RESPONSIBILITIES OF PRIMARY 
                    PROGRAMMATIC UNITS.

  [(a) In General.--There are established within the Office, to 
carry out the programmatic responsibilities of the Office--
          [(1) the Data Center; and
          [(2) the Research and Analysis Center.
  [(b) Data Center.--
          [(1) General duties.--
                  [(A) Data collection.--The Data Center, on 
                behalf of the Council, shall collect, validate, 
                and maintain all data necessary to carry out 
                the duties of the Data Center, as described in 
                this subtitle. The data assembled shall be 
                obtained from member agencies, commercial data 
                providers, publicly available data sources, and 
                financial entities under subparagraph (B).
                  [(B) Authority.--
                          [(i) In general.--The Office may, as 
                        determined by the Council or by the 
                        Director in consultation with the 
                        Council, require the submission of 
                        periodic and other reports from any 
                        financial company for the purpose of 
                        assessing the extent to which a 
                        financial activity or financial market 
                        in which the financial company 
                        participates, or the financial company 
                        itself, poses a threat to the financial 
                        stability of the United States.
                          [(ii) Mitigation of report burden.--
                        Before requiring the submission of a 
                        report from any financial company that 
                        is regulated by a member agency, any 
                        primary financial regulatory agency, a 
                        foreign supervisory authority, or the 
                        Office shall coordinate with such 
                        agencies or authority, and shall, 
                        whenever possible, rely on information 
                        available from such agencies or 
                        authority.
                          [(iii) Collection of financial 
                        transaction and position data.--The 
                        Office shall collect, on a schedule 
                        determined by the Director, in 
                        consultation with the Council, 
                        financial transaction data and position 
                        data from financial companies.
                  [(C) Rulemaking.--The Office shall promulgate 
                regulations pursuant to subsections (a)(1), 
                (a)(2), (a)(7), and (c)(1) of section 153 
                regarding the type and scope of the data to be 
                collected by the Data Center under this 
                paragraph.
          [(2) Responsibilities.--
                  [(A) Publication.--The Data Center shall 
                prepare and publish, in a manner that is easily 
                accessible to the public--
                          [(i) a financial company reference 
                        database;
                          [(ii) a financial instrument 
                        reference database; and
                          [(iii) formats and standards for 
                        Office data, including standards for 
                        reporting financial transaction and 
                        position data to the Office.
                  [(B) Confidentiality.--The Data Center shall 
                not publish any confidential data under 
                subparagraph (A).
          [(3) Information security.--The Director shall ensure 
        that data collected and maintained by the Data Center 
        are kept secure and protected against unauthorized 
        disclosure.
          [(4) Catalog of financial entities and instruments.--
        The Data Center shall maintain a catalog of the 
        financial entities and instruments reported to the 
        Office.
          [(5) Availability to the council and member 
        agencies.--The Data Center shall make data collected 
        and maintained by the Data Center available to the 
        Council and member agencies, as necessary to support 
        their regulatory responsibilities.
          [(6) Other authority.--The Office shall, after 
        consultation with the member agencies, provide certain 
        data to financial industry participants and to the 
        general public to increase market transparency and 
        facilitate research on the financial system, to the 
        extent that intellectual property rights are not 
        violated, business confidential information is properly 
        protected, and the sharing of such information poses no 
        significant threats to the financial system of the 
        United States.
  [(c) Research and Analysis Center.--
          [(1) General duties.--The Research and Analysis 
        Center, on behalf of the Council, shall develop and 
        maintain independent analytical capabilities and 
        computing resources--
                  [(A) to develop and maintain metrics and 
                reporting systems for risks to the financial 
                stability of the United States;
                  [(B) to monitor, investigate, and report on 
                changes in systemwide risk levels and patterns 
                to the Council and Congress;
                  [(C) to conduct, coordinate, and sponsor 
                research to support and improve regulation of 
                financial entities and markets;
                  [(D) to evaluate and report on stress tests 
                or other stability-related evaluations of 
                financial entities overseen by the member 
                agencies;
                  [(E) to maintain expertise in such areas as 
                may be necessary to support specific requests 
                for advice and assistance from financial 
                regulators;
                  [(F) to investigate disruptions and failures 
                in the financial markets, report findings, and 
                make recommendations to the Council based on 
                those findings;
                  [(G) to conduct studies and provide advice on 
                the impact of policies related to systemic 
                risk; and
                  [(H) to promote best practices for financial 
                risk management.
  [(d) Reporting Responsibilities.--
          [(1) Required reports.--Not later than 2 years after 
        the date of enactment of this Act, and not later than 
        120 days after the end of each fiscal year thereafter, 
        the Office shall prepare and submit a report to 
        Congress.
          [(2) Content.--Each report required by this 
        subsection shall assess the state of the United States 
        financial system, including--
                  [(A) an analysis of any threats to the 
                financial stability of the United States;
                  [(B) the status of the efforts of the Office 
                in meeting the mission of the Office; and
                  [(C) key findings from the research and 
                analysis of the financial system by the Office.

[SEC. 155. FUNDING.

  [(a) Financial Research Fund.--
          [(1) Fund established.--There is established in the 
        Treasury of the United States a separate fund to be 
        known as the ``Financial Research Fund''.
          [(2) Fund receipts.--All amounts provided to the 
        Office under subsection (c), and all assessments that 
        the Office receives under subsection (d) shall be 
        deposited into the Financial Research Fund.
          [(3) Investments authorized.--
                  [(A) Amounts in fund may be invested.--The 
                Director may request the Secretary to invest 
                the portion of the Financial Research Fund that 
                is not, in the judgment of the Director, 
                required to meet the needs of the Office.
                  [(B) Eligible investments.--Investments shall 
                be made by the Secretary in obligations of the 
                United States or obligations that are 
                guaranteed as to principal and interest by the 
                United States, with maturities suitable to the 
                needs of the Financial Research Fund, as 
                determined by the Director.
          [(4) Interest and proceeds credited.--The interest 
        on, and the proceeds from the sale or redemption of, 
        any obligations held in the Financial Research Fund 
        shall be credited to and form a part of the Financial 
        Research Fund.
  [(b) Use of Funds.--
          [(1) In general.--Funds obtained by, transferred to, 
        or credited to the Financial Research Fund shall be 
        immediately available to the Office, and shall remain 
        available until expended, to pay the expenses of the 
        Office in carrying out the duties and responsibilities 
        of the Office.
          [(2) Fees, assessments, and other funds not 
        government funds.--Funds obtained by, transferred to, 
        or credited to the Financial Research Fund shall not be 
        construed to be Government funds or appropriated 
        moneys.
          [(3) Amounts not subject to apportionment.--
        Notwithstanding any other provision of law, amounts in 
        the Financial Research Fund shall not be subject to 
        apportionment for purposes of chapter 15 of title 31, 
        United States Code, or under any other authority, or 
        for any other purpose.
  [(c) Interim Funding.--During the 2-year period following the 
date of enactment of this Act, the Board of Governors shall 
provide to the Office an amount sufficient to cover the 
expenses of the Office.
  [(d) Permanent Self-funding.--Beginning 2 years after the 
date of enactment of this Act, the Secretary shall establish, 
by regulation, and with the approval of the Council, an 
assessment schedule, including the assessment base and rates, 
applicable to bank holding companies with total consolidated 
assets of 50,000,000,000 or greater and nonbank financial 
companies supervised by the Board of Governors, that takes into 
account differences among such companies, based on the 
considerations for establishing the prudential standards under 
section 115, to collect assessments equal to the total expenses 
of the Office.

[SEC. 156. TRANSITION OVERSIGHT.

  [(a) Purpose.--The purpose of this section is to ensure that 
the Office--
          [(1) has an orderly and organized startup;
          [(2) attracts and retains a qualified workforce; and
          [(3) establishes comprehensive employee training and 
        benefits programs.
  [(b) Reporting Requirement.--
          [(1) In general.--The Office shall submit an annual 
        report to the Committee on Banking, Housing, and Urban 
        Affairs of the Senate and the Committee on Financial 
        Services of the House of Representatives that includes 
        the plans described in paragraph (2).
          [(2) Plans.--The plans described in this paragraph 
        are as follows:
                  [(A) Training and workforce development 
                plan.--The Office shall submit a training and 
                workforce development plan that includes, to 
                the extent practicable--
                          [(i) identification of skill and 
                        technical expertise needs and actions 
                        taken to meet those requirements;
                          [(ii) steps taken to foster 
                        innovation and creativity;
                          [(iii) leadership development and 
                        succession planning; and
                          [(iv) effective use of technology by 
                        employees.
                  [(B) Workplace flexibility plan.--The Office 
                shall submit a workforce flexibility plan that 
                includes, to the extent practicable--
                          [(i) telework;
                          [(ii) flexible work schedules;
                          [(iii) phased retirement;
                          [(iv) reemployed annuitants;
                          [(v) part-time work;
                          [(vi) job sharing;
                          [(vii) parental leave benefits and 
                        childcare assistance;
                          [(viii) domestic partner benefits;
                          [(ix) other workplace flexibilities; 
                        or
                          [(x) any combination of the items 
                        described in clauses (i) through (ix).
                  [(C) Recruitment and retention plan.--The 
                Office shall submit a recruitment and retention 
                plan that includes, to the extent practicable, 
                provisions relating to--
                          [(i) the steps necessary to target 
                        highly qualified applicant pools with 
                        diverse backgrounds;
                          [(ii) streamlined employment 
                        application processes;
                          [(iii) the provision of timely 
                        notification of the status of 
                        employment applications to applicants; 
                        and
                          [(iv) the collection of information 
                        to measure indicators of hiring 
                        effectiveness.
  [(c) Expiration.--The reporting requirement under subsection 
(b) shall terminate 5 years after the date of enactment of this 
Act.
  [(d) Rule of Construction.--Nothing in this section may be 
construed to affect--
          [(1) a collective bargaining agreement, as that term 
        is defined in section 7103(a)(8) of title 5, United 
        States Code, that is in effect on the date of enactment 
        of this Act; or
          [(2) the rights of employees under chapter 71 of 
        title 5, United States Code.]

Subtitle C--Additional Board of Governors Authority for Certain Nonbank 
Financial Companies and Bank Holding Companies

           *       *       *       *       *       *       *


SEC. 165. ENHANCED SUPERVISION AND PRUDENTIAL STANDARDS FOR NONBANK 
                    FINANCIAL COMPANIES SUPERVISED BY THE BOARD OF 
                    GOVERNORS AND CERTAIN BANK HOLDING COMPANIES.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Resolution Plan and Credit Exposure Reports.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) No limiting effect.--A resolution plan submitted 
        in accordance with this subsection shall not be binding 
        on a bankruptcy court[, a receiver appointed under 
        title II,] or any other authority that is authorized or 
        required to resolve the nonbank financial company 
        supervised by the Board, any bank holding company, or 
        any subsidiary or affiliate of the foregoing.

           *       *       *       *       *       *       *


                [TITLE II--ORDERLY LIQUIDATION AUTHORITY

[SEC. 201. DEFINITIONS.

  [(a) In General.--In this title, the following definitions 
shall apply:
          [(1) Administrative expenses of the receiver.--The 
        term ``administrative expenses of the receiver'' 
        includes--
                  [(A) the actual, necessary costs and expenses 
                incurred by the Corporation as receiver for a 
                covered financial company in liquidating a 
                covered financial company; and
                  [(B) any obligations that the Corporation as 
                receiver for a covered financial company 
                determines are necessary and appropriate to 
                facilitate the smooth and orderly liquidation 
                of the covered financial company.
          [(2) Bankruptcy code.--The term ``Bankruptcy Code'' 
        means title 11, United States Code.
          [(3) Bridge financial company.--The term ``bridge 
        financial company'' means a new financial company 
        organized by the Corporation in accordance with section 
        210(h) for the purpose of resolving a covered financial 
        company.
          [(4) Claim.--The term ``claim'' means any right to 
        payment, whether or not such right is reduced to 
        judgment, liquidated, unliquidated, fixed, contingent, 
        matured, unmatured, disputed, undisputed, legal, 
        equitable, secured, or unsecured.
          [(5) Company.--The term ``company'' has the same 
        meaning as in section 2(b) of the Bank Holding Company 
        Act of 1956 (12 U.S.C. 1841(b)), except that such term 
        includes any company described in paragraph (11), the 
        majority of the securities of which are owned by the 
        United States or any State.
          [(6) Court.--The term ``Court'' means the United 
        States District Court for the District of Columbia, 
        unless the context otherwise requires.
          [(7) Covered broker or dealer.--The term ``covered 
        broker or dealer'' means a covered financial company 
        that is a broker or dealer that--
                  [(A) is registered with the Commission under 
                section 15(b) of the Securities Exchange Act of 
                1934 (15 U.S.C. 78o(b)); and
                  [(B) is a member of SIPC.
          [(8) Covered financial company.--The term ``covered 
        financial company''--
                  [(A) means a financial company for which a 
                determination has been made under section 
                203(b); and
                  [(B) does not include an insured depository 
                institution.
          [(9) Covered subsidiary.--The term ``covered 
        subsidiary'' means a subsidiary of a covered financial 
        company, other than--
                  [(A) an insured depository institution;
                  [(B) an insurance company; or
                  [(C) a covered broker or dealer.
          [(10) Definitions relating to covered brokers and 
        dealers.--The terms ``customer'', ``customer name 
        securities'', ``customer property'', and ``net equity'' 
        in the context of a covered broker or dealer, have the 
        same meanings as in section 16 of the Securities 
        Investor Protection Act of 1970 (15 U.S.C. 78lll).
          [(11) Financial company.--The term ``financial 
        company'' means any company that--
                  [(A) is incorporated or organized under any 
                provision of Federal law or the laws of any 
                State;
                  [(B) is--
                          [(i) a bank holding company, as 
                        defined in section 2(a) of the Bank 
                        Holding Company Act of 1956 (12 U.S.C. 
                        1841(a));
                          [(ii) a nonbank financial company 
                        supervised by the Board of Governors;
                          [(iii) any company that is 
                        predominantly engaged in activities 
                        that the Board of Governors has 
                        determined are financial in nature or 
                        incidental thereto for purposes of 
                        section 4(k) of the Bank Holding 
                        Company Act of 1956 (12 U.S.C. 1843(k)) 
                        other than a company described in 
                        clause (i) or (ii); or
                          [(iv) any subsidiary of any company 
                        described in any of clauses (i) through 
                        (iii) that is predominantly engaged in 
                        activities that the Board of Governors 
                        has determined are financial in nature 
                        or incidental thereto for purposes of 
                        section 4(k) of the Bank Holding 
                        Company Act of 1956 (12 U.S.C. 1843(k)) 
                        (other than a subsidiary that is an 
                        insured depository institution or an 
                        insurance company); and
                  [(C) is not a Farm Credit System institution 
                chartered under and subject to the provisions 
                of the Farm Credit Act of 1971, as amended (12 
                U.S.C. 2001 et seq.), a governmental entity, or 
                a regulated entity, as defined under section 
                1303(20) of the Federal Housing Enterprises 
                Financial Safety and Soundness Act of 1992 (12 
                U.S.C. 4502(20)).
          [(12) Fund.--The term ``Fund'' means the Orderly 
        Liquidation Fund established under section 210(n).
          [(13) Insurance company.--The term ``insurance 
        company'' means any entity that is--
                  [(A) engaged in the business of insurance;
                  [(B) subject to regulation by a State 
                insurance regulator; and
                  [(C) covered by a State law that is designed 
                to specifically deal with the rehabilitation, 
                liquidation, or insolvency of an insurance 
                company.
          [(14) Nonbank financial company.--The term ``nonbank 
        financial company'' has the same meaning as in section 
        102(a)(4)(C).
          [(15) Nonbank financial company supervised by the 
        board of governors.--The term ``nonbank financial 
        company supervised by the Board of Governors'' has the 
        same meaning as in section 102(a)(4)(D).
          [(16) SIPC.--The term ``SIPC'' means the Securities 
        Investor Protection Corporation.
  [(b) Definitional Criteria.--For purpose of the definition of 
the term ``financial company'' under subsection (a)(11), no 
company shall be deemed to be predominantly engaged in 
activities that the Board of Governors has determined are 
financial in nature or incidental thereto for purposes of 
section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)), if the consolidated revenues of such company from 
such activities constitute less than 85 percent of the total 
consolidated revenues of such company, as the Corporation, in 
consultation with the Secretary, shall establish by regulation. 
In determining whether a company is a financial company under 
this title, the consolidated revenues derived from the 
ownership or control of a depository institution shall be 
included.

[SEC. 202. JUDICIAL REVIEW.

  [(a) Commencement of Orderly Liquidation.--
          [(1) Petition to district court.--
                  [(A) District court review.--
                          [(i) Petition to district court.--
                        Subsequent to a determination by the 
                        Secretary under section 203 that a 
                        financial company satisfies the 
                        criteria in section 203(b), the 
                        Secretary shall notify the Corporation 
                        and the covered financial company. If 
                        the board of directors (or body 
                        performing similar functions) of the 
                        covered financial company acquiesces or 
                        consents to the appointment of the 
                        Corporation as receiver, the Secretary 
                        shall appoint the Corporation as 
                        receiver. If the board of directors (or 
                        body performing similar functions) of 
                        the covered financial company does not 
                        acquiesce or consent to the appointment 
                        of the Corporation as receiver, the 
                        Secretary shall petition the United 
                        States District Court for the District 
                        of Columbia for an order authorizing 
                        the Secretary to appoint the 
                        Corporation as receiver.
                          [(ii) Form and content of order.--The 
                        Secretary shall present all relevant 
                        findings and the recommendation made 
                        pursuant to section 203(a) to the 
                        Court. The petition shall be filed 
                        under seal.
                          [(iii) Determination.--On a strictly 
                        confidential basis, and without any 
                        prior public disclosure, the Court, 
                        after notice to the covered financial 
                        company and a hearing in which the 
                        covered financial company may oppose 
                        the petition, shall determine whether 
                        the determination of the Secretary that 
                        the covered financial company is in 
                        default or in danger of default and 
                        satisfies the definition of a financial 
                        company under section 201(a)(11) is 
                        arbitrary and capricious.
                          [(iv) Issuance of order.--If the 
                        Court determines that the determination 
                        of the Secretary that the covered 
                        financial company is in default or in 
                        danger of default and satisfies the 
                        definition of a financial company under 
                        section 201(a)(11)--
                                  [(I) is not arbitrary and 
                                capricious, the Court shall 
                                issue an order immediately 
                                authorizing the Secretary to 
                                appoint the Corporation as 
                                receiver of the covered 
                                financial company; or
                                  [(II) is arbitrary and 
                                capricious, the Court shall 
                                immediately provide to the 
                                Secretary a written statement 
                                of each reason supporting its 
                                determination, and afford the 
                                Secretary an immediate 
                                opportunity to amend and refile 
                                the petition under clause (i).
                          [(v) Petition granted by operation of 
                        law.--If the Court does not make a 
                        determination within 24 hours of 
                        receipt of the petition--
                                  [(I) the petition shall be 
                                granted by operation of law;
                                  [(II) the Secretary shall 
                                appoint the Corporation as 
                                receiver; and
                                  [(III) liquidation under this 
                                title shall automatically and 
                                without further notice or 
                                action be commenced and the 
                                Corporation may immediately 
                                take all actions authorized 
                                under this title.
                  [(B) Effect of determination.--The 
                determination of the Court under subparagraph 
                (A) shall be final, and shall be subject to 
                appeal only in accordance with paragraph (2). 
                The decision shall not be subject to any stay 
                or injunction pending appeal. Upon conclusion 
                of its proceedings under subparagraph (A), the 
                Court shall provide immediately for the record 
                a written statement of each reason supporting 
                the decision of the Court, and shall provide 
                copies thereof to the Secretary and the covered 
                financial company.
                  [(C) Criminal penalties.--A person who 
                recklessly discloses a determination of the 
                Secretary under section 203(b) or a petition of 
                the Secretary under subparagraph (A), or the 
                pendency of court proceedings as provided for 
                under subparagraph (A), shall be fined not more 
                than 250,000, or imprisoned for not more than 5 
                years, or both.
          [(2) Appeal of decisions of the district court.--
                  [(A) Appeal to court of appeals.--
                          [(i) In general.--Subject to clause 
                        (ii), the United States Court of 
                        Appeals for the District of Columbia 
                        Circuit shall have jurisdiction of an 
                        appeal of a final decision of the Court 
                        filed by the Secretary or a covered 
                        financial company, through its board of 
                        directors, notwithstanding section 
                        210(a)(1)(A)(i), not later than 30 days 
                        after the date on which the decision of 
                        the Court is rendered or deemed 
                        rendered under this subsection.
                          [(ii) Condition of jurisdiction.--The 
                        Court of Appeals shall have 
                        jurisdiction of an appeal by a covered 
                        financial company only if the covered 
                        financial company did not acquiesce or 
                        consent to the appointment of a 
                        receiver by the Secretary under 
                        paragraph (1)(A).
                          [(iii) Expedition.--The Court of 
                        Appeals shall consider any appeal under 
                        this subparagraph on an expedited 
                        basis.
                          [(iv) Scope of review.--For an appeal 
                        taken under this subparagraph, review 
                        shall be limited to whether the 
                        determination of the Secretary that a 
                        covered financial company is in default 
                        or in danger of default and satisfies 
                        the definition of a financial company 
                        under section 201(a)(11) is arbitrary 
                        and capricious.
                  [(B) Appeal to the supreme court.--
                          [(i) In general.--A petition for a 
                        writ of certiorari to review a decision 
                        of the Court of Appeals under 
                        subparagraph (A) may be filed by the 
                        Secretary or the covered financial 
                        company, through its board of 
                        directors, notwithstanding section 
                        210(a)(1)(A)(i), with the Supreme Court 
                        of the United States, not later than 30 
                        days after the date of the final 
                        decision of the Court of Appeals, and 
                        the Supreme Court shall have 
                        discretionary jurisdiction to review 
                        such decision.
                          [(ii) Written statement.--In the 
                        event of a petition under clause (i), 
                        the Court of Appeals shall immediately 
                        provide for the record a written 
                        statement of each reason for its 
                        decision.
                          [(iii) Expedition.--The Supreme Court 
                        shall consider any petition under this 
                        subparagraph on an expedited basis.
                          [(iv) Scope of review.--Review by the 
                        Supreme Court under this subparagraph 
                        shall be limited to whether the 
                        determination of the Secretary that the 
                        covered financial company is in default 
                        or in danger of default and satisfies 
                        the definition of a financial company 
                        under section 201(a)(11) is arbitrary 
                        and capricious.
  [(b) Establishment and Transmittal of Rules and Procedures.--
          [(1) In general.--Not later than 6 months after the 
        date of enactment of this Act, the Court shall 
        establish such rules and procedures as may be necessary 
        to ensure the orderly conduct of proceedings, including 
        rules and procedures to ensure that the 24-hour 
        deadline is met and that the Secretary shall have an 
        ongoing opportunity to amend and refile petitions under 
        subsection (a)(1).
          [(2) Publication of rules.--The rules and procedures 
        established under paragraph (1), and any modifications 
        of such rules and procedures, shall be recorded and 
        shall be transmitted to--
                  [(A) the Committee on the Judiciary of the 
                Senate;
                  [(B) the Committee on Banking, Housing, and 
                Urban Affairs of the Senate;
                  [(C) the Committee on the Judiciary of the 
                House of Representatives; and
                  [(D) the Committee on Financial Services of 
                the House of Representatives.
  [(c) Provisions Applicable to Financial Companies.--
          [(1) Bankruptcy code.--Except as provided in this 
        subsection, the provisions of the Bankruptcy Code and 
        rules issued thereunder or otherwise applicable 
        insolvency law, and not the provisions of this title, 
        shall apply to financial companies that are not covered 
        financial companies for which the Corporation has been 
        appointed as receiver.
          [(2) This title.--The provisions of this title shall 
        exclusively apply to and govern all matters relating to 
        covered financial companies for which the Corporation 
        is appointed as receiver, and no provisions of the 
        Bankruptcy Code or the rules issued thereunder shall 
        apply in such cases, except as expressly provided in 
        this title.
  [(d) Time Limit on Receivership Authority.--
          [(1) Baseline period.--Any appointment of the 
        Corporation as receiver under this section shall 
        terminate at the end of the 3-year period beginning on 
        the date on which such appointment is made.
          [(2) Extension of time limit.--The time limit 
        established in paragraph (1) may be extended by the 
        Corporation for up to 1 additional year, if the 
        Chairperson of the Corporation determines and certifies 
        in writing to the Committee on Banking, Housing, and 
        Urban Affairs of the Senate and the Committee on 
        Financial Services of the House of Representatives that 
        continuation of the receivership is necessary--
                  [(A) to--
                          [(i) maximize the net present value 
                        return from the sale or other 
                        disposition of the assets of the 
                        covered financial company; or
                          [(ii) minimize the amount of loss 
                        realized upon the sale or other 
                        disposition of the assets of the 
                        covered financial company; and
                  [(B) to protect the stability of the 
                financial system of the United States.
          [(3) Second extension of time limit.--
                  [(A) In general.--The time limit under this 
                subsection, as extended under paragraph (2), 
                may be extended for up to 1 additional year, if 
                the Chairperson of the Corporation, with the 
                concurrence of the Secretary, submits the 
                certifications described in paragraph (2).
                  [(B) Additional report required.--Not later 
                than 30 days after the date of commencement of 
                the extension under subparagraph (A), the 
                Corporation shall submit a report to the 
                Committee on Banking, Housing, and Urban 
                Affairs of the Senate and the Committee on 
                Financial Services of the House of 
                Representatives describing the need for the 
                extension and the specific plan of the 
                Corporation to conclude the receivership before 
                the end of the second extension.
          [(4) Ongoing litigation.--The time limit under this 
        subsection, as extended under paragraph (3), may be 
        further extended solely for the purpose of completing 
        ongoing litigation in which the Corporation as receiver 
        is a party, provided that the appointment of the 
        Corporation as receiver shall terminate not later than 
        90 days after the date of completion of such 
        litigation, if--
                  [(A) the Council determines that the 
                Corporation used its best efforts to conclude 
                the receivership in accordance with its plan 
                before the end of the time limit described in 
                paragraph (3);
                  [(B) the Council determines that the 
                completion of longer-term responsibilities in 
                the form of ongoing litigation justifies the 
                need for an extension; and
                  [(C) the Corporation submits a report 
                approved by the Council not later than 30 days 
                after the date of the determinations by the 
                Council under subparagraphs (A) and (B) to the 
                Committee on Banking, Housing, and Urban 
                Affairs of the Senate and the Committee on 
                Financial Services of the House of 
                Representatives, describing--
                          [(i) the ongoing litigation 
                        justifying the need for an extension; 
                        and
                          [(ii) the specific plan of the 
                        Corporation to complete the litigation 
                        and conclude the receivership.
          [(5) Regulations.--The Corporation may issue 
        regulations governing the termination of receiverships 
        under this title.
          [(6) No liability.--The Corporation and the Deposit 
        Insurance Fund shall not be liable for unresolved 
        claims arising from the receivership after the 
        termination of the receivership.
  [(e) Study of Bankruptcy and Orderly Liquidation Process for 
Financial Companies.--
          [(1) Study.--
                  [(A) In general.--The Administrative Office 
                of the United States Courts and the Comptroller 
                General of the United States shall each monitor 
                the activities of the Court, and each such 
                Office shall conduct separate studies regarding 
                the bankruptcy and orderly liquidation process 
                for financial companies under the Bankruptcy 
                Code.
                  [(B) Issues to be studied.--In conducting the 
                study under subparagraph (A), the 
                Administrative Office of the United States 
                Courts and the Comptroller General of the 
                United States each shall evaluate--
                          [(i) the effectiveness of chapter 7 
                        or chapter 11 of the Bankruptcy Code in 
                        facilitating the orderly liquidation or 
                        reorganization of financial companies;
                          [(ii) ways to maximize the efficiency 
                        and effectiveness of the Court; and
                          [(iii) ways to make the orderly 
                        liquidation process under the 
                        Bankruptcy Code for financial companies 
                        more effective.
          [(2) Reports.--Not later than 1 year after the date 
        of enactment of this Act, in each successive year until 
        the third year, and every fifth year after that date of 
        enactment, the Administrative Office of the United 
        States Courts and the Comptroller General of the United 
        States shall submit to the Committee on Banking, 
        Housing, and Urban Affairs and the Committee on the 
        Judiciary of the Senate and the Committee on Financial 
        Services and the Committee on the Judiciary of the 
        House of Representatives separate reports summarizing 
        the results of the studies conducted under paragraph 
        (1).
  [(f) Study of International Coordination Relating to 
Bankruptcy Process for Financial Companies.--
          [(1) Study.--
                  [(A) In general.--The Comptroller General of 
                the United States shall conduct a study 
                regarding international coordination relating 
                to the orderly liquidation of financial 
                companies under the Bankruptcy Code.
                  [(B) Issues to be studied.--In conducting the 
                study under subparagraph (A), the Comptroller 
                General of the United States shall evaluate, 
                with respect to the bankruptcy process for 
                financial companies--
                          [(i) the extent to which 
                        international coordination currently 
                        exists;
                          [(ii) current mechanisms and 
                        structures for facilitating 
                        international cooperation;
                          [(iii) barriers to effective 
                        international coordination; and
                          [(iv) ways to increase and make more 
                        effective international coordination.
          [(2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Comptroller General of the 
        United States shall submit to the Committee on Banking, 
        Housing, and Urban Affairs and the Committee on the 
        Judiciary of the Senate and the Committee on Financial 
        Services and the Committee on the Judiciary of the 
        House of Representatives and the Secretary a report 
        summarizing the results of the study conducted under 
        paragraph (1).
  [(g) Study of Prompt Corrective Action Implementation by the 
Appropriate Federal Agencies.--
          [(1) Study.--The Comptroller General of the United 
        States shall conduct a study regarding the 
        implementation of prompt corrective action by the 
        appropriate Federal banking agencies.
          [(2) Issues to be studied.--In conducting the study 
        under paragraph (1), the Comptroller General shall 
        evaluate--
                  [(A) the effectiveness of implementation of 
                prompt corrective action by the appropriate 
                Federal banking agencies and the resolution of 
                insured depository institutions by the 
                Corporation; and
                  [(B) ways to make prompt corrective action a 
                more effective tool to resolve the insured 
                depository institutions at the least possible 
                long-term cost to the Deposit Insurance Fund.
          [(3) Report to council.--Not later than 1 year after 
        the date of enactment of this Act, the Comptroller 
        General shall submit a report to the Council on the 
        results of the study conducted under this subsection.
          [(4) Council report of action.--Not later than 6 
        months after the date of receipt of the report from the 
        Comptroller General under paragraph (3), the Council 
        shall submit a report to the Committee on Banking, 
        Housing, and Urban Affairs of the Senate and the 
        Committee on Financial Services of the House of 
        Representatives on actions taken in response to the 
        report, including any recommendations made to the 
        Federal primary financial regulatory agencies under 
        section 120.

[SEC. 203. SYSTEMIC RISK DETERMINATION.

  [(a) Written Recommendation and Determination.--
          [(1) Vote required.--
                  [(A) In general.--On their own initiative, or 
                at the request of the Secretary, the 
                Corporation and the Board of Governors shall 
                consider whether to make a written 
                recommendation described in paragraph (2) with 
                respect to whether the Secretary should appoint 
                the Corporation as receiver for a financial 
                company. Such recommendation shall be made upon 
                a vote of not fewer than \2/3\ of the members 
                of the Board of Governors then serving and \2/
                3\ of the members of the board of directors of 
                the Corporation then serving.
                  [(B) Cases involving brokers or dealers.--In 
                the case of a broker or dealer, or in which the 
                largest United States subsidiary (as measured 
                by total assets as of the end of the previous 
                calendar quarter) of a financial company is a 
                broker or dealer, the Commission and the Board 
                of Governors, at the request of the Secretary, 
                or on their own initiative, shall consider 
                whether to make the written recommendation 
                described in paragraph (2) with respect to the 
                financial company. Subject to the requirements 
                in paragraph (2), such recommendation shall be 
                made upon a vote of not fewer than \2/3\ of the 
                members of the Board of Governors then serving 
                and \2/3\ of the members of the Commission then 
                serving, and in consultation with the 
                Corporation.
                  [(C) Cases involving insurance companies.--In 
                the case of an insurance company, or in which 
                the largest United States subsidiary (as 
                measured by total assets as of the end of the 
                previous calendar quarter) of a financial 
                company is an insurance company, the Director 
                of the Federal Insurance Office and the Board 
                of Governors, at the request of the Secretary 
                or on their own initiative, shall consider 
                whether to make the written recommendation 
                described in paragraph (2) with respect to the 
                financial company. Subject to the requirements 
                in paragraph (2), such recommendation shall be 
                made upon a vote of not fewer than \2/3\ of the 
                Board of Governors then serving and the 
                affirmative approval of the Director of the 
                Federal Insurance Office, and in consultation 
                with the Corporation.
          [(2) Recommendation required.--Any written 
        recommendation pursuant to paragraph (1) shall 
        contain--
                  [(A) an evaluation of whether the financial 
                company is in default or in danger of default;
                  [(B) a description of the effect that the 
                default of the financial company would have on 
                financial stability in the United States;
                  [(C) a description of the effect that the 
                default of the financial company would have on 
                economic conditions or financial stability for 
                low income, minority, or underserved 
                communities;
                  [(D) a recommendation regarding the nature 
                and the extent of actions to be taken under 
                this title regarding the financial company;
                  [(E) an evaluation of the likelihood of a 
                private sector alternative to prevent the 
                default of the financial company;
                  [(F) an evaluation of why a case under the 
                Bankruptcy Code is not appropriate for the 
                financial company;
                  [(G) an evaluation of the effects on 
                creditors, counterparties, and shareholders of 
                the financial company and other market 
                participants; and
                  [(H) an evaluation of whether the company 
                satisfies the definition of a financial company 
                under section 201.
  [(b) Determination by the Secretary.--Notwithstanding any 
other provision of Federal or State law, the Secretary shall 
take action in accordance with section 202(a)(1)(A), if, upon 
the written recommendation under subsection (a), the Secretary 
(in consultation with the President) determines that--
          [(1) the financial company is in default or in danger 
        of default;
          [(2) the failure of the financial company and its 
        resolution under otherwise applicable Federal or State 
        law would have serious adverse effects on financial 
        stability in the United States;
          [(3) no viable private sector alternative is 
        available to prevent the default of the financial 
        company;
          [(4) any effect on the claims or interests of 
        creditors, counterparties, and shareholders of the 
        financial company and other market participants as a 
        result of actions to be taken under this title is 
        appropriate, given the impact that any action taken 
        under this title would have on financial stability in 
        the United States;
          [(5) any action under section 204 would avoid or 
        mitigate such adverse effects, taking into 
        consideration the effectiveness of the action in 
        mitigating potential adverse effects on the financial 
        system, the cost to the general fund of the Treasury, 
        and the potential to increase excessive risk taking on 
        the part of creditors, counterparties, and shareholders 
        in the financial company;
          [(6) a Federal regulatory agency has ordered the 
        financial company to convert all of its convertible 
        debt instruments that are subject to the regulatory 
        order; and
          [(7) the company satisfies the definition of a 
        financial company under section 201.
  [(c) Documentation and Review.--
          [(1) In general.--The Secretary shall--
                  [(A) document any determination under 
                subsection (b);
                  [(B) retain the documentation for review 
                under paragraph (2); and
                  [(C) notify the covered financial company and 
                the Corporation of such determination.
          [(2) Report to congress.--Not later than 24 hours 
        after the date of appointment of the Corporation as 
        receiver for a covered financial company, the Secretary 
        shall provide written notice of the recommendations and 
        determinations reached in accordance with subsections 
        (a) and (b) to the Majority Leader and the Minority 
        Leader of the Senate and the Speaker and the Minority 
        Leader of the House of Representatives, the Committee 
        on Banking, Housing, and Urban Affairs of the Senate, 
        and the Committee on Financial Services of the House of 
        Representatives, which shall consist of a summary of 
        the basis for the determination, including, to the 
        extent available at the time of the determination--
                  [(A) the size and financial condition of the 
                covered financial company;
                  [(B) the sources of capital and credit 
                support that were available to the covered 
                financial company;
                  [(C) the operations of the covered financial 
                company that could have had a significant 
                impact on financial stability, markets, or 
                both;
                  [(D) identification of the banks and 
                financial companies which may be able to 
                provide the services offered by the covered 
                financial company;
                  [(E) any potential international 
                ramifications of resolution of the covered 
                financial company under other applicable 
                insolvency law;
                  [(F) an estimate of the potential effect of 
                the resolution of the covered financial company 
                under other applicable insolvency law on the 
                financial stability of the United States;
                  [(G) the potential effect of the appointment 
                of a receiver by the Secretary on consumers;
                  [(H) the potential effect of the appointment 
                of a receiver by the Secretary on the financial 
                system, financial markets, and banks and other 
                financial companies; and
                  [(I) whether resolution of the covered 
                financial company under other applicable 
                insolvency law would cause banks or other 
                financial companies to experience severe 
                liquidity distress.
          [(3) Reports to congress and the public.--
                  [(A) In general.--Not later than 60 days 
                after the date of appointment of the 
                Corporation as receiver for a covered financial 
                company, the Corporation shall file a report 
                with the Committee on Banking, Housing, and 
                Urban Affairs of the Senate and the Committee 
                on Financial Services of the House of 
                Representatives--
                          [(i) setting forth information on the 
                        financial condition of the covered 
                        financial company as of the date of the 
                        appointment, including a description of 
                        its assets and liabilities;
                          [(ii) describing the plan of, and 
                        actions taken by, the Corporation to 
                        wind down the covered financial 
                        company;
                          [(iii) explaining each instance in 
                        which the Corporation waived any 
                        applicable requirements of part 366 of 
                        title 12, Code of Federal Regulations 
                        (or any successor thereto) with respect 
                        to conflicts of interest by any person 
                        in the private sector who was retained 
                        to provide services to the Corporation 
                        in connection with such receivership;
                          [(iv) describing the reasons for the 
                        provision of any funding to the 
                        receivership out of the Fund;
                          [(v) setting forth the expected costs 
                        of the orderly liquidation of the 
                        covered financial company;
                          [(vi) setting forth the identity of 
                        any claimant that is treated in a 
                        manner different from other similarly 
                        situated claimants under subsection 
                        (b)(4), (d)(4), or (h)(5)(E), the 
                        amount of any additional payment to 
                        such claimant under subsection (d)(4), 
                        and the reason for any such action; and
                          [(vii) which report the Corporation 
                        shall publish on an online website 
                        maintained by the Corporation, subject 
                        to maintaining appropriate 
                        confidentiality.
                  [(B) Amendments.--The Corporation shall, on a 
                timely basis, not less frequently than 
                quarterly, amend or revise and resubmit the 
                reports prepared under this paragraph, as 
                necessary.
                  [(C) Congressional testimony.--The 
                Corporation and the primary financial 
                regulatory agency, if any, of the financial 
                company for which the Corporation was appointed 
                receiver under this title shall appear before 
                Congress, if requested, not later than 30 days 
                after the date on which the Corporation first 
                files the reports required under subparagraph 
                (A).
          [(4) Default or in danger of default.--For purposes 
        of this title, a financial company shall be considered 
        to be in default or in danger of default if, as 
        determined in accordance with subsection (b)--
                  [(A) a case has been, or likely will promptly 
                be, commenced with respect to the financial 
                company under the Bankruptcy Code;
                  [(B) the financial company has incurred, or 
                is likely to incur, losses that will deplete 
                all or substantially all of its capital, and 
                there is no reasonable prospect for the company 
                to avoid such depletion;
                  [(C) the assets of the financial company are, 
                or are likely to be, less than its obligations 
                to creditors and others; or
                  [(D) the financial company is, or is likely 
                to be, unable to pay its obligations (other 
                than those subject to a bona fide dispute) in 
                the normal course of business.
          [(5) GAO review.--The Comptroller General of the 
        United States shall review and report to Congress on 
        any determination under subsection (b), that results in 
        the appointment of the Corporation as receiver, 
        including--
                  [(A) the basis for the determination;
                  [(B) the purpose for which any action was 
                taken pursuant thereto;
                  [(C) the likely effect of the determination 
                and such action on the incentives and conduct 
                of financial companies and their creditors, 
                counterparties, and shareholders; and
                  [(D) the likely disruptive effect of the 
                determination and such action on the reasonable 
                expectations of creditors, counterparties, and 
                shareholders, taking into account the impact 
                any action under this title would have on 
                financial stability in the United States, 
                including whether the rights of such parties 
                will be disrupted.
  [(d) Corporation Policies and Procedures.--As soon as is 
practicable after the date of enactment of this Act, the 
Corporation shall establish policies and procedures that are 
acceptable to the Secretary governing the use of funds 
available to the Corporation to carry out this title, including 
the terms and conditions for the provision and use of funds 
under sections 204(d), 210(h)(2)(G)(iv), and 210(h)(9).
  [(e) Treatment of Insurance Companies and Insurance Company 
Subsidiaries.--
          [(1) In general.--Notwithstanding subsection (b), if 
        an insurance company is a covered financial company or 
        a subsidiary or affiliate of a covered financial 
        company, the liquidation or rehabilitation of such 
        insurance company, and any subsidiary or affiliate of 
        such company that is not excepted under paragraph (2), 
        shall be conducted as provided under applicable State 
        law.
          [(2) Exception for subsidiaries and affiliates.--The 
        requirement of paragraph (1) shall not apply with 
        respect to any subsidiary or affiliate of an insurance 
        company that is not itself an insurance company.
          [(3) Backup authority.--Notwithstanding paragraph 
        (1), with respect to a covered financial company 
        described in paragraph (1), if, after the end of the 
        60-day period beginning on the date on which a 
        determination is made under section 202(a) with respect 
        to such company, the appropriate regulatory agency has 
        not filed the appropriate judicial action in the 
        appropriate State court to place such company into 
        orderly liquidation under the laws and requirements of 
        the State, the Corporation shall have the authority to 
        stand in the place of the appropriate regulatory agency 
        and file the appropriate judicial action in the 
        appropriate State court to place such company into 
        orderly liquidation under the laws and requirements of 
        the State.

[SEC. 204. ORDERLY LIQUIDATION OF COVERED FINANCIAL COMPANIES.

  [(a) Purpose of Orderly Liquidation Authority.--It is the 
purpose of this title to provide the necessary authority to 
liquidate failing financial companies that pose a significant 
risk to the financial stability of the United States in a 
manner that mitigates such risk and minimizes moral hazard. The 
authority provided in this title shall be exercised in the 
manner that best fulfills such purpose, so that--
          [(1) creditors and shareholders will bear the losses 
        of the financial company;
          [(2) management responsible for the condition of the 
        financial company will not be retained; and
          [(3) the Corporation and other appropriate agencies 
        will take all steps necessary and appropriate to assure 
        that all parties, including management, directors, and 
        third parties, having responsibility for the condition 
        of the financial company bear losses consistent with 
        their responsibility, including actions for damages, 
        restitution, and recoupment of compensation and other 
        gains not compatible with such responsibility.
  [(b) Corporation as Receiver.--Upon the appointment of the 
Corporation under section 202, the Corporation shall act as the 
receiver for the covered financial company, with all of the 
rights and obligations set forth in this title.
  [(c) Consultation.--The Corporation, as receiver--
          [(1) shall consult with the primary financial 
        regulatory agency or agencies of the covered financial 
        company and its covered subsidiaries for purposes of 
        ensuring an orderly liquidation of the covered 
        financial company;
          [(2) may consult with, or under subsection 
        (a)(1)(B)(v) or (a)(1)(L) of section 210, acquire the 
        services of, any outside experts, as appropriate to 
        inform and aid the Corporation in the orderly 
        liquidation process;
          [(3) shall consult with the primary financial 
        regulatory agency or agencies of any subsidiaries of 
        the covered financial company that are not covered 
        subsidiaries, and coordinate with such regulators 
        regarding the treatment of such solvent subsidiaries 
        and the separate resolution of any such insolvent 
        subsidiaries under other governmental authority, as 
        appropriate; and
          [(4) shall consult with the Commission and the 
        Securities Investor Protection Corporation in the case 
        of any covered financial company for which the 
        Corporation has been appointed as receiver that is a 
        broker or dealer registered with the Commission under 
        section 15(b) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78o(b)) and is a member of the Securities 
        Investor Protection Corporation, for the purpose of 
        determining whether to transfer to a bridge financial 
        company organized by the Corporation as receiver, 
        without consent of any customer, customer accounts of 
        the covered financial company.
  [(d) Funding for Orderly Liquidation.--Upon its appointment 
as receiver for a covered financial company, and thereafter as 
the Corporation may, in its discretion, determine to be 
necessary or appropriate, the Corporation may make available to 
the receivership, subject to the conditions set forth in 
section 206 and subject to the plan described in section 
210(n)(9), funds for the orderly liquidation of the covered 
financial company. All funds provided by the Corporation under 
this subsection shall have a priority of claims under 
subparagraph (A) or (B) of section 210(b)(1), as applicable, 
including funds used for--
          [(1) making loans to, or purchasing any debt 
        obligation of, the covered financial company or any 
        covered subsidiary;
          [(2) purchasing or guaranteeing against loss the 
        assets of the covered financial company or any covered 
        subsidiary, directly or through an entity established 
        by the Corporation for such purpose;
          [(3) assuming or guaranteeing the obligations of the 
        covered financial company or any covered subsidiary to 
        1 or more third parties;
          [(4) taking a lien on any or all assets of the 
        covered financial company or any covered subsidiary, 
        including a first priority lien on all unencumbered 
        assets of the covered financial company or any covered 
        subsidiary to secure repayment of any transactions 
        conducted under this subsection;
          [(5) selling or transferring all, or any part, of 
        such acquired assets, liabilities, or obligations of 
        the covered financial company or any covered 
        subsidiary; and
          [(6) making payments pursuant to subsections (b)(4), 
        (d)(4), and (h)(5)(E) of section 210.

[SEC. 205. ORDERLY LIQUIDATION OF COVERED BROKERS AND DEALERS.

  [(a) Appointment of SIPC as Trustee.--
          [(1) Appointment.--Upon the appointment of the 
        Corporation as receiver for any covered broker or 
        dealer, the Corporation shall appoint, without any need 
        for court approval, the Securities Investor Protection 
        Corporation to act as trustee for the liquidation under 
        the Securities Investor Protection Act of 1970 (15 
        U.S.C. 78aaa et seq.) of the covered broker or dealer.
          [(2) Actions by sipc.--
                  [(A) Filing.--Upon appointment of SIPC under 
                paragraph (1), SIPC shall promptly file with 
                any Federal district court of competent 
                jurisdiction specified in section 21 or 27 of 
                the Securities Exchange Act of 1934 (15 U.S.C. 
                78u, 78aa), an application for a protective 
                decree under the Securities Investor Protection 
                Act of 1970 (15 U.S.C. 78aaa et seq.) as to the 
                covered broker or dealer. The Federal district 
                court shall accept and approve the filing, 
                including outside of normal business hours, and 
                shall immediately issue the protective decree 
                as to the covered broker or dealer.
                  [(B) Administration by sipc.--Following entry 
                of the protective decree, and except as 
                otherwise provided in this section, the 
                determination of claims and the liquidation of 
                assets retained in the receivership of the 
                covered broker or dealer and not transferred to 
                the bridge financial company shall be 
                administered under the Securities Investor 
                Protection Act of 1970 (15 U.S.C. 78aaa et 
                seq.) by SIPC, as trustee for the covered 
                broker or dealer.
                  [(C) Definition of filing date.--For purposes 
                of the liquidation proceeding, the term 
                ``filing date'' means the date on which the 
                Corporation is appointed as receiver of the 
                covered broker or dealer.
                  [(D) Determination of claims.--As trustee for 
                the covered broker or dealer, SIPC shall 
                determine and satisfy, consistent with this 
                title and with the Securities Investor 
                Protection Act of 1970 (15 U.S.C. 78aaa et 
                seq.), all claims against the covered broker or 
                dealer arising on or before the filing date.
  [(b) Powers and Duties of SIPC.--
          [(1) In general.--Except as provided in this section, 
        upon its appointment as trustee for the liquidation of 
        a covered broker or dealer, SIPC shall have all of the 
        powers and duties provided by the Securities Investor 
        Protection Act of 1970 (15 U.S.C. 78aaa et seq.), 
        including, without limitation, all rights of action 
        against third parties, and shall conduct such 
        liquidation in accordance with the terms of the 
        Securities Investor Protection Act of 1970 (15 U.S.C. 
        78aaa et seq.), except that SIPC shall have no powers 
        or duties with respect to assets and liabilities 
        transferred by the Corporation from the covered broker 
        or dealer to any bridge financial company established 
        in accordance with this title.
          [(2) Limitation of powers.--The exercise by SIPC of 
        powers and functions as trustee under subsection (a) 
        shall not impair or impede the exercise of the powers 
        and duties of the Corporation with regard to--
                  [(A) any action, except as otherwise provided 
                in this title--
                          [(i) to make funds available under 
                        section 204(d);
                          [(ii) to organize, establish, 
                        operate, or terminate any bridge 
                        financial company;
                          [(iii) to transfer assets and 
                        liabilities;
                          [(iv) to enforce or repudiate 
                        contracts; or
                          [(v) to take any other action 
                        relating to such bridge financial 
                        company under section 210; or
                  [(B) determining claims under subsection (e).
          [(3) Protective decree.--SIPC and the Corporation, in 
        consultation with the Commission, shall jointly 
        determine the terms of the protective decree to be 
        filed by SIPC with any court of competent jurisdiction 
        under section 21 or 27 of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78u, 78aa), as required by 
        subsection (a).
          [(4) Qualified financial contracts.--Notwithstanding 
        any provision of the Securities Investor Protection Act 
        of 1970 (15 U.S.C. 78aaa et seq.) to the contrary 
        (including section 5(b)(2)(C) of that Act (15 U.S.C. 
        78eee(b)(2)(C))), the rights and obligations of any 
        party to a qualified financial contract (as that term 
        is defined in section 210(c)(8)) to which a covered 
        broker or dealer for which the Corporation has been 
        appointed receiver is a party shall be governed 
        exclusively by section 210, including the limitations 
        and restrictions contained in section 210(c)(10)(B).
  [(c) Limitation on Court Action.--Except as otherwise 
provided in this title, no court may take any action, including 
any action pursuant to the Securities Investor Protection Act 
of 1970 (15 U.S.C. 78aaa et seq.) or the Bankruptcy Code, to 
restrain or affect the exercise of powers or functions of the 
Corporation as receiver for a covered broker or dealer and any 
claims against the Corporation as such receiver shall be 
determined in accordance with subsection (e) and such claims 
shall be limited to money damages.
  [(d) Actions by Corporation as Receiver.--
          [(1) In general.--Notwithstanding any other provision 
        of this title, no action taken by the Corporation as 
        receiver with respect to a covered broker or dealer 
        shall--
                  [(A) adversely affect the rights of a 
                customer to customer property or customer name 
                securities;
                  [(B) diminish the amount or timely payment of 
                net equity claims of customers; or
                  [(C) otherwise impair the recoveries provided 
                to a customer under the Securities Investor 
                Protection Act of 1970 (15 U.S.C. 78aaa et 
                seq.).
          [(2) Net proceeds.--The net proceeds from any 
        transfer, sale, or disposition of assets of the covered 
        broker or dealer, or proceeds thereof by the 
        Corporation as receiver for the covered broker or 
        dealer shall be for the benefit of the estate of the 
        covered broker or dealer, as provided in this title.
  [(e) Claims Against the Corporation as Receiver.--Any claim 
against the Corporation as receiver for a covered broker or 
dealer for assets transferred to a bridge financial company 
established with respect to such covered broker or dealer--
          [(1) shall be determined in accordance with section 
        210(a)(2); and
          [(2) may be reviewed by the appropriate district or 
        territorial court of the United States in accordance 
        with section 210(a)(5).
  [(f) Satisfaction of Customer Claims.--
          [(1) Obligations to customers.--Notwithstanding any 
        other provision of this title, all obligations of a 
        covered broker or dealer or of any bridge financial 
        company established with respect to such covered broker 
        or dealer to a customer relating to, or net equity 
        claims based upon, customer property or customer name 
        securities shall be promptly discharged by SIPC, the 
        Corporation, or the bridge financial company, as 
        applicable, by the delivery of securities or the making 
        of payments to or for the account of such customer, in 
        a manner and in an amount at least as beneficial to the 
        customer as would have been the case had the actual 
        proceeds realized from the liquidation of the covered 
        broker or dealer under this title been distributed in a 
        proceeding under the Securities Investor Protection Act 
        of 1970 (15 U.S.C. 78aaa et seq.) without the 
        appointment of the Corporation as receiver and without 
        any transfer of assets or liabilities to a bridge 
        financial company, and with a filing date as of the 
        date on which the Corporation is appointed as receiver.
          [(2) Satisfaction of claims by sipc.--SIPC, as 
        trustee for a covered broker or dealer, shall satisfy 
        customer claims in the manner and amount provided under 
        the Securities Investor Protection Act of 1970 (15 
        U.S.C. 78aaa et seq.), as if the appointment of the 
        Corporation as receiver had not occurred, and with a 
        filing date as of the date on which the Corporation is 
        appointed as receiver. The Corporation shall satisfy 
        customer claims, to the extent that a customer would 
        have received more securities or cash with respect to 
        the allocation of customer property had the covered 
        financial company been subject to a proceeding under 
        the Securities Investor Protection Act (15 U.S.C. 78aaa 
        et seq.) without the appointment of the Corporation as 
        receiver, and with a filing date as of the date on 
        which the Corporation is appointed as receiver.
  [(g) Priorities.--
          [(1) Customer property.--As trustee for a covered 
        broker or dealer, SIPC shall allocate customer property 
        and deliver customer name securities in accordance with 
        section 8(c) of the Securities Investor Protection Act 
        of 1970 (15 U.S.C. 78fff-2(c)).
          [(2) Other claims.--All claims other than those 
        described in paragraph (1) (including any unpaid claim 
        by a customer for the allowed net equity claim of such 
        customer from customer property) shall be paid in 
        accordance with the priorities in section 210(b).
  [(h) Rulemaking.--The Commission and the Corporation, after 
consultation with SIPC, shall jointly issue rules to implement 
this section.

[SEC. 206. MANDATORY TERMS AND CONDITIONS FOR ALL ORDERLY LIQUIDATION 
                    ACTIONS.

  [In taking action under this title, the Corporation shall--
          [(1) determine that such action is necessary for 
        purposes of the financial stability of the United 
        States, and not for the purpose of preserving the 
        covered financial company;
          [(2) ensure that the shareholders of a covered 
        financial company do not receive payment until after 
        all other claims and the Fund are fully paid;
          [(3) ensure that unsecured creditors bear losses in 
        accordance with the priority of claim provisions in 
        section 210;
          [(4) ensure that management responsible for the 
        failed condition of the covered financial company is 
        removed (if such management has not already been 
        removed at the time at which the Corporation is 
        appointed receiver);
          [(5) ensure that the members of the board of 
        directors (or body performing similar functions) 
        responsible for the failed condition of the covered 
        financial company are removed, if such members have not 
        already been removed at the time the Corporation is 
        appointed as receiver; and
          [(6) not take an equity interest in or become a 
        shareholder of any covered financial company or any 
        covered subsidiary.

[SEC. 207. DIRECTORS NOT LIABLE FOR ACQUIESCING IN APPOINTMENT OF 
                    RECEIVER.

  [The members of the board of directors (or body performing 
similar functions) of a covered financial company shall not be 
liable to the shareholders or creditors thereof for acquiescing 
in or consenting in good faith to the appointment of the 
Corporation as receiver for the covered financial company under 
section 203.

[SEC. 208. DISMISSAL AND EXCLUSION OF OTHER ACTIONS.

  [(a) In General.--Effective as of the date of the appointment 
of the Corporation as receiver for the covered financial 
company under section 202 or the appointment of SIPC as trustee 
for a covered broker or dealer under section 205, as 
applicable, any case or proceeding commenced with respect to 
the covered financial company under the Bankruptcy Code or the 
Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et 
seq.) shall be dismissed, upon notice to the bankruptcy court 
(with respect to a case commenced under the Bankruptcy Code), 
and upon notice to SIPC (with respect to a covered broker or 
dealer) and no such case or proceeding may be commenced with 
respect to a covered financial company at any time while the 
orderly liquidation is pending.
  [(b) Revesting of Assets.--Effective as of the date of 
appointment of the Corporation as receiver, the assets of a 
covered financial company shall, to the extent they have vested 
in any entity other than the covered financial company as a 
result of any case or proceeding commenced with respect to the 
covered financial company under the Bankruptcy Code, the 
Securities Investor Protection Act of 1970 (15 U.S.C. 78aaa et 
seq.), or any similar provision of State liquidation or 
insolvency law applicable to the covered financial company, 
revest in the covered financial company.
  [(c) Limitation.--Notwithstanding subsections (a) and (b), 
any order entered or other relief granted by a bankruptcy court 
prior to the date of appointment of the Corporation as receiver 
shall continue with the same validity as if an orderly 
liquidation had not been commenced.

[SEC. 209. RULEMAKING; NON-CONFLICTING LAW.

  [The Corporation shall, in consultation with the Council, 
prescribe such rules or regulations as the Corporation 
considers necessary or appropriate to implement this title, 
including rules and regulations with respect to the rights, 
interests, and priorities of creditors, counterparties, 
security entitlement holders, or other persons with respect to 
any covered financial company or any assets or other property 
of or held by such covered financial company, and address the 
potential for conflicts of interest between or among individual 
receiverships established under this title or under the Federal 
Deposit Insurance Act. To the extent possible, the Corporation 
shall seek to harmonize applicable rules and regulations 
promulgated under this section with the insolvency laws that 
would otherwise apply to a covered financial company.

[SEC. 210. POWERS AND DUTIES OF THE CORPORATION.

  [(a) Powers and Authorities.--
          [(1) General powers.--
                  [(A) Successor to covered financial 
                company.--The Corporation shall, upon 
                appointment as receiver for a covered financial 
                company under this title, succeed to--
                          [(i) all rights, titles, powers, and 
                        privileges of the covered financial 
                        company and its assets, and of any 
                        stockholder, member, officer, or 
                        director of such company; and
                          [(ii) title to the books, records, 
                        and assets of any previous receiver or 
                        other legal custodian of such covered 
                        financial company.
                  [(B) Operation of the covered financial 
                company during the period of orderly 
                liquidation.--The Corporation, as receiver for 
                a covered financial company, may--
                          [(i) take over the assets of and 
                        operate the covered financial company 
                        with all of the powers of the members 
                        or shareholders, the directors, and the 
                        officers of the covered financial 
                        company, and conduct all business of 
                        the covered financial company;
                          [(ii) collect all obligations and 
                        money owed to the covered financial 
                        company;
                          [(iii) perform all functions of the 
                        covered financial company, in the name 
                        of the covered financial company;
                          [(iv) manage the assets and property 
                        of the covered financial company, 
                        consistent with maximization of the 
                        value of the assets in the context of 
                        the orderly liquidation; and
                          [(v) provide by contract for 
                        assistance in fulfilling any function, 
                        activity, action, or duty of the 
                        Corporation as receiver.
                  [(C) Functions of covered financial company 
                officers, directors, and shareholders.--The 
                Corporation may provide for the exercise of any 
                function by any member or stockholder, 
                director, or officer of any covered financial 
                company for which the Corporation has been 
                appointed as receiver under this title.
                  [(D) Additional powers as receiver.--The 
                Corporation shall, as receiver for a covered 
                financial company, and subject to all legally 
                enforceable and perfected security interests 
                and all legally enforceable security 
                entitlements in respect of assets held by the 
                covered financial company, liquidate, and wind-
                up the affairs of a covered financial company, 
                including taking steps to realize upon the 
                assets of the covered financial company, in 
                such manner as the Corporation deems 
                appropriate, including through the sale of 
                assets, the transfer of assets to a bridge 
                financial company established under subsection 
                (h), or the exercise of any other rights or 
                privileges granted to the receiver under this 
                section.
                  [(E) Additional powers with respect to 
                failing subsidiaries of a covered financial 
                company.--
                          [(i) In general.--In any case in 
                        which a receiver is appointed for a 
                        covered financial company under section 
                        202, the Corporation may appoint itself 
                        as receiver of any covered subsidiary 
                        of the covered financial company that 
                        is organized under Federal law or the 
                        laws of any State, if the Corporation 
                        and the Secretary jointly determine 
                        that--
                                  [(I) the covered subsidiary 
                                is in default or in danger of 
                                default;
                                  [(II) such action would avoid 
                                or mitigate serious adverse 
                                effects on the financial 
                                stability or economic 
                                conditions of the United 
                                States; and
                                  [(III) such action would 
                                facilitate the orderly 
                                liquidation of the covered 
                                financial company.
                          [(ii) Treatment as covered financial 
                        company.--If the Corporation is 
                        appointed as receiver of a covered 
                        subsidiary of a covered financial 
                        company under clause (i), the covered 
                        subsidiary shall thereafter be 
                        considered a covered financial company 
                        under this title, and the Corporation 
                        shall thereafter have all the powers 
                        and rights with respect to that covered 
                        subsidiary as it has with respect to a 
                        covered financial company under this 
                        title.
                  [(F) Organization of bridge companies.--The 
                Corporation, as receiver for a covered 
                financial company, may organize a bridge 
                financial company under subsection (h).
                  [(G) Merger; transfer of assets and 
                liabilities.--
                          [(i) In general.--Subject to clauses 
                        (ii) and (iii), the Corporation, as 
                        receiver for a covered financial 
                        company, may--
                                  [(I) merge the covered 
                                financial company with another 
                                company; or
                                  [(II) transfer any asset or 
                                liability of the covered 
                                financial company (including 
                                any assets and liabilities held 
                                by the covered financial 
                                company for security 
                                entitlement holders, any 
                                customer property, or any 
                                assets and liabilities 
                                associated with any trust or 
                                custody business) without 
                                obtaining any approval, 
                                assignment, or consent with 
                                respect to such transfer.
                          [(ii) Federal agency approval; 
                        antitrust review.--With respect to a 
                        transaction described in clause (i)(I) 
                        that requires approval by a Federal 
                        agency--
                                  [(I) the transaction may not 
                                be consummated before the 5th 
                                calendar day after the date of 
                                approval by the Federal agency 
                                responsible for such approval;
                                  [(II) if, in connection with 
                                any such approval, a report on 
                                competitive factors is 
                                required, the Federal agency 
                                responsible for such approval 
                                shall promptly notify the 
                                Attorney General of the United 
                                States of the proposed 
                                transaction, and the Attorney 
                                General shall provide the 
                                required report not later than 
                                10 days after the date of the 
                                request; and
                                  [(III) if notification under 
                                section 7A of the Clayton Act 
                                is required with respect to 
                                such transaction, then the 
                                required waiting period shall 
                                end on the 15th day after the 
                                date on which the Attorney 
                                General and the Federal Trade 
                                Commission receive such 
                                notification, unless the 
                                waiting period is terminated 
                                earlier under subsection (b)(2) 
                                of such section 7A, or is 
                                extended pursuant to subsection 
                                (e)(2) of such section 7A.
                          [(iii) Setoff.--Subject to the other 
                        provisions of this title, any 
                        transferee of assets from a receiver, 
                        including a bridge financial company, 
                        shall be subject to such claims or 
                        rights as would prevail over the rights 
                        of such transferee in such assets under 
                        applicable noninsolvency law.
                  [(H) Payment of valid obligations.--The 
                Corporation, as receiver for a covered 
                financial company, shall, to the extent that 
                funds are available, pay all valid obligations 
                of the covered financial company that are due 
                and payable at the time of the appointment of 
                the Corporation as receiver, in accordance with 
                the prescriptions and limitations of this 
                title.
                  [(I) Applicable noninsolvency law.--Except as 
                may otherwise be provided in this title, the 
                applicable noninsolvency law shall be 
                determined by the noninsolvency choice of law 
                rules otherwise applicable to the claims, 
                rights, titles, persons, or entities at issue.
                  [(J) Subpoena authority.--
                          [(i) In general.--The Corporation, as 
                        receiver for a covered financial 
                        company, may, for purposes of carrying 
                        out any power, authority, or duty with 
                        respect to the covered financial 
                        company (including determining any 
                        claim against the covered financial 
                        company and determining and realizing 
                        upon any asset of any person in the 
                        course of collecting money due the 
                        covered financial company), exercise 
                        any power established under section 
                        8(n) of the Federal Deposit Insurance 
                        Act, as if the Corporation were the 
                        appropriate Federal banking agency for 
                        the covered financial company, and the 
                        covered financial company were an 
                        insured depository institution.
                          [(ii) Rule of construction.--This 
                        subparagraph may not be construed as 
                        limiting any rights that the 
                        Corporation, in any capacity, might 
                        otherwise have to exercise any powers 
                        described in clause (i) or under any 
                        other provision of law.
                  [(K) Incidental powers.--The Corporation, as 
                receiver for a covered financial company, may 
                exercise all powers and authorities 
                specifically granted to receivers under this 
                title, and such incidental powers as shall be 
                necessary to carry out such powers under this 
                title.
                  [(L) Utilization of private sector.--In 
                carrying out its responsibilities in the 
                management and disposition of assets from the 
                covered financial company, the Corporation, as 
                receiver for a covered financial company, may 
                utilize the services of private persons, 
                including real estate and loan portfolio asset 
                management, property management, auction 
                marketing, legal, and brokerage services, if 
                such services are available in the private 
                sector, and the Corporation determines that 
                utilization of such services is practicable, 
                efficient, and cost effective.
                  [(M) Shareholders and creditors of covered 
                financial company.--Notwithstanding any other 
                provision of law, the Corporation, as receiver 
                for a covered financial company, shall succeed 
                by operation of law to the rights, titles, 
                powers, and privileges described in 
                subparagraph (A), and shall terminate all 
                rights and claims that the stockholders and 
                creditors of the covered financial company may 
                have against the assets of the covered 
                financial company or the Corporation arising 
                out of their status as stockholders or 
                creditors, except for their right to payment, 
                resolution, or other satisfaction of their 
                claims, as permitted under this section. The 
                Corporation shall ensure that shareholders and 
                unsecured creditors bear losses, consistent 
                with the priority of claims provisions under 
                this section.
                  [(N) Coordination with foreign financial 
                authorities.--The Corporation, as receiver for 
                a covered financial company, shall coordinate, 
                to the maximum extent possible, with the 
                appropriate foreign financial authorities 
                regarding the orderly liquidation of any 
                covered financial company that has assets or 
                operations in a country other than the United 
                States.
                  [(O) Restriction on transfers.--
                          [(i) Selection of accounts for 
                        transfer.--If the Corporation 
                        establishes one or more bridge 
                        financial companies with respect to a 
                        covered broker or dealer, the 
                        Corporation shall transfer to one of 
                        such bridge financial companies, all 
                        customer accounts of the covered broker 
                        or dealer, and all associated customer 
                        name securities and customer property, 
                        unless the Corporation, after 
                        consulting with the Commission and 
                        SIPC, determines that--
                                  [(I) the customer accounts, 
                                customer name securities, and 
                                customer property are likely to 
                                be promptly transferred to 
                                another broker or dealer that 
                                is registered with the 
                                Commission under section 15(b) 
                                of the Securities Exchange Act 
                                of 1934 (15 U.S.C. 73o(b)) and 
                                is a member of SIPC; or
                                  [(II) the transfer of the 
                                accounts to a bridge financial 
                                company would materially 
                                interfere with the ability of 
                                the Corporation to avoid or 
                                mitigate serious adverse 
                                effects on financial stability 
                                or economic conditions in the 
                                United States.
                          [(ii) Transfer of property.--SIPC, as 
                        trustee for the liquidation of the 
                        covered broker or dealer, and the 
                        Commission shall provide any and all 
                        reasonable assistance necessary to 
                        complete such transfers by the 
                        Corporation.
                          [(iii) Customer consent and court 
                        approval not required.--Neither 
                        customer consent nor court approval 
                        shall be required to transfer any 
                        customer accounts or associated 
                        customer name securities or customer 
                        property to a bridge financial company 
                        in accordance with this section.
                          [(iv) Notification of sipc and 
                        sharing of information.--The 
                        Corporation shall identify to SIPC the 
                        customer accounts and associated 
                        customer name securities and customer 
                        property transferred to the bridge 
                        financial company. The Corporation and 
                        SIPC shall cooperate in the sharing of 
                        any information necessary for each 
                        entity to discharge its obligations 
                        under this title and under the 
                        Securities Investor Protection Act of 
                        1970 (15 U.S.C. 78aaa et seq.) 
                        including by providing access to the 
                        books and records of the covered 
                        financial company and any bridge 
                        financial company established in 
                        accordance with this title.
          [(2) Determination of claims.--
                  [(A) In general.--The Corporation, as 
                receiver for a covered financial company, shall 
                report on claims, as set forth in section 
                203(c)(3). Subject to paragraph (4) of this 
                subsection, the Corporation, as receiver for a 
                covered financial company, shall determine 
                claims in accordance with the requirements of 
                this subsection and regulations prescribed 
                under section 209.
                  [(B) Notice requirements.--The Corporation, 
                as receiver for a covered financial company, in 
                any case involving the liquidation or winding 
                up of the affairs of a covered financial 
                company, shall--
                          [(i) promptly publish a notice to the 
                        creditors of the covered financial 
                        company to present their claims, 
                        together with proof, to the receiver by 
                        a date specified in the notice, which 
                        shall be not earlier than 90 days after 
                        the date of publication of such notice; 
                        and
                          [(ii) republish such notice 1 month 
                        and 2 months, respectively, after the 
                        date of publication under clause (i).
                  [(C) Mailing required.--The Corporation as 
                receiver shall mail a notice similar to the 
                notice published under clause (i) or (ii) of 
                subparagraph (B), at the time of such 
                publication, to any creditor shown on the books 
                and records of the covered financial company--
                          [(i) at the last address of the 
                        creditor appearing in such books;
                          [(ii) in any claim filed by the 
                        claimant; or
                          [(iii) upon discovery of the name and 
                        address of a claimant not appearing on 
                        the books and records of the covered 
                        financial company, not later than 30 
                        days after the date of the discovery of 
                        such name and address.
          [(3) Procedures for resolution of claims.--
                  [(A) Decision period.--
                          [(i) In general.--Prior to the 180th 
                        day after the date on which a claim 
                        against a covered financial company is 
                        filed with the Corporation as receiver, 
                        or such later date as may be agreed as 
                        provided in clause (ii), the 
                        Corporation shall notify the claimant 
                        whether it allows or disallows the 
                        claim, in accordance with subparagraphs 
                        (B), (C), and (D).
                          [(ii) Extension of time.--By written 
                        agreement executed not later than 180 
                        days after the date on which a claim 
                        against a covered financial company is 
                        filed with the Corporation, the period 
                        described in clause (i) may be extended 
                        by written agreement between the 
                        claimant and the Corporation. Failure 
                        to notify the claimant of any 
                        disallowance within the time period set 
                        forth in clause (i), as it may be 
                        extended by agreement under this 
                        clause, shall be deemed to be a 
                        disallowance of such claim, and the 
                        claimant may file or continue an action 
                        in court, as provided in paragraph (4).
                          [(iii) Mailing of notice 
                        sufficient.--The requirements of clause 
                        (i) shall be deemed to be satisfied if 
                        the notice of any decision with respect 
                        to any claim is mailed to the last 
                        address of the claimant which appears--
                                  [(I) on the books, records, 
                                or both of the covered 
                                financial company;
                                  [(II) in the claim filed by 
                                the claimant; or
                                  [(III) in documents submitted 
                                in proof of the claim.
                          [(iv) Contents of notice of 
                        disallowance.--If the Corporation as 
                        receiver disallows any claim filed 
                        under clause (i), the notice to the 
                        claimant shall contain--
                                  [(I) a statement of each 
                                reason for the disallowance; 
                                and
                                  [(II) the procedures required 
                                to file or continue an action 
                                in court, as provided in 
                                paragraph (4).
                  [(B) Allowance of proven claim.--The receiver 
                shall allow any claim received by the receiver 
                on or before the date specified in the notice 
                under paragraph (2)(B)(i), which is proved to 
                the satisfaction of the receiver.
                  [(C) Disallowance of claims filed after end 
                of filing period.--
                          [(i) In general.--Except as provided 
                        in clause (ii), claims filed after the 
                        date specified in the notice published 
                        under paragraph (2)(B)(i) shall be 
                        disallowed, and such disallowance shall 
                        be final.
                          [(ii) Certain exceptions.--Clause (i) 
                        shall not apply with respect to any 
                        claim filed by a claimant after the 
                        date specified in the notice published 
                        under paragraph (2)(B)(i), and such 
                        claim may be considered by the receiver 
                        under subparagraph (B), if--
                                  [(I) the claimant did not 
                                receive notice of the 
                                appointment of the receiver in 
                                time to file such claim before 
                                such date; and
                                  [(II) such claim is filed in 
                                time to permit payment of such 
                                claim.
                  [(D) Authority to disallow claims.--
                          [(i) In general.--The Corporation may 
                        disallow any portion of any claim by a 
                        creditor or claim of a security, 
                        preference, setoff, or priority which 
                        is not proved to the satisfaction of 
                        the Corporation.
                          [(ii) Payments to undersecured 
                        creditors.--In the case of a claim 
                        against a covered financial company 
                        that is secured by any property or 
                        other asset of such covered financial 
                        company, the receiver--
                                  [(I) may treat the portion of 
                                such claim which exceeds an 
                                amount equal to the fair market 
                                value of such property or other 
                                asset as an unsecured claim; 
                                and
                                  [(II) may not make any 
                                payment with respect to such 
                                unsecured portion of the claim, 
                                other than in connection with 
                                the disposition of all claims 
                                of unsecured creditors of the 
                                covered financial company.
                          [(iii) Exceptions.--No provision of 
                        this paragraph shall apply with respect 
                        to--
                                  [(I) any extension of credit 
                                from any Federal reserve bank, 
                                or the Corporation, to any 
                                covered financial company; or
                                  [(II) subject to clause (ii), 
                                any legally enforceable and 
                                perfected security interest in 
                                the assets of the covered 
                                financial company securing any 
                                such extension of credit.
                  [(E) Legal effect of filing.--
                          [(i) Statute of limitations tolled.--
                        For purposes of any applicable statute 
                        of limitations, the filing of a claim 
                        with the receiver shall constitute a 
                        commencement of an action.
                          [(ii) No prejudice to other 
                        actions.--Subject to paragraph (8), the 
                        filing of a claim with the receiver 
                        shall not prejudice any right of the 
                        claimant to continue any action which 
                        was filed before the date of 
                        appointment of the receiver for the 
                        covered financial company.
          [(4) Judicial determination of claims.--
                  [(A) In general.--Subject to subparagraph 
                (B), a claimant may file suit on a claim (or 
                continue an action commenced before the date of 
                appointment of the Corporation as receiver) in 
                the district or territorial court of the United 
                States for the district within which the 
                principal place of business of the covered 
                financial company is located (and such court 
                shall have jurisdiction to hear such claim).
                  [(B) Timing.--A claim under subparagraph (A) 
                may be filed before the end of the 60-day 
                period beginning on the earlier of--
                          [(i) the end of the period described 
                        in paragraph (3)(A)(i) (or, if extended 
                        by agreement of the Corporation and the 
                        claimant, the period described in 
                        paragraph (3)(A)(ii)) with respect to 
                        any claim against a covered financial 
                        company for which the Corporation is 
                        receiver; or
                          [(ii) the date of any notice of 
                        disallowance of such claim pursuant to 
                        paragraph (3)(A)(i).
                  [(C) Statute of limitations.--If any claimant 
                fails to file suit on such claim (or to 
                continue an action on such claim commenced 
                before the date of appointment of the 
                Corporation as receiver) prior to the end of 
                the 60-day period described in subparagraph 
                (B), the claim shall be deemed to be disallowed 
                (other than any portion of such claim which was 
                allowed by the receiver) as of the end of such 
                period, such disallowance shall be final, and 
                the claimant shall have no further rights or 
                remedies with respect to such claim.
          [(5) Expedited determination of claims.--
                  [(A) Procedure required.--The Corporation 
                shall establish a procedure for expedited 
                relief outside of the claims process 
                established under paragraph (3), for any 
                claimant that alleges--
                          [(i) having a legally valid and 
                        enforceable or perfected security 
                        interest in property of a covered 
                        financial company or control of any 
                        legally valid and enforceable security 
                        entitlement in respect of any asset 
                        held by the covered financial company 
                        for which the Corporation has been 
                        appointed receiver; and
                          [(ii) that irreparable injury will 
                        occur if the claims procedure 
                        established under paragraph (3) is 
                        followed.
                  [(B) Determination period.--Prior to the end 
                of the 90-day period beginning on the date on 
                which a claim is filed in accordance with the 
                procedures established pursuant to subparagraph 
                (A), the Corporation shall--
                          [(i) determine--
                                  [(I) whether to allow or 
                                disallow such claim, or any 
                                portion thereof; or
                                  [(II) whether such claim 
                                should be determined pursuant 
                                to the procedures established 
                                pursuant to paragraph (3);
                          [(ii) notify the claimant of the 
                        determination; and
                          [(iii) if the claim is disallowed, 
                        provide a statement of each reason for 
                        the disallowance and the procedure for 
                        obtaining a judicial determination.
                  [(C) Period for filing or renewing suit.--Any 
                claimant who files a request for expedited 
                relief shall be permitted to file suit (or 
                continue a suit filed before the date of 
                appointment of the Corporation as receiver 
                seeking a determination of the rights of the 
                claimant with respect to such security interest 
                (or such security entitlement) after the 
                earlier of--
                          [(i) the end of the 90-day period 
                        beginning on the date of the filing of 
                        a request for expedited relief; or
                          [(ii) the date on which the 
                        Corporation denies the claim or a 
                        portion thereof.
                  [(D) Statute of limitations.--If an action 
                described in subparagraph (C) is not filed, or 
                the motion to renew a previously filed suit is 
                not made, before the end of the 30-day period 
                beginning on the date on which such action or 
                motion may be filed in accordance with 
                subparagraph (C), the claim shall be deemed to 
                be disallowed as of the end of such period 
                (other than any portion of such claim which was 
                allowed by the receiver), such disallowance 
                shall be final, and the claimant shall have no 
                further rights or remedies with respect to such 
                claim.
                  [(E) Legal effect of filing.--
                          [(i) Statute of limitations tolled.--
                        For purposes of any applicable statute 
                        of limitations, the filing of a claim 
                        with the receiver shall constitute a 
                        commencement of an action.
                          [(ii) No prejudice to other 
                        actions.--Subject to paragraph (8), the 
                        filing of a claim with the receiver 
                        shall not prejudice any right of the 
                        claimant to continue any action which 
                        was filed before the appointment of the 
                        Corporation as receiver for the covered 
                        financial company.
          [(6) Agreements against interest of the receiver.--No 
        agreement that tends to diminish or defeat the interest 
        of the Corporation as receiver in any asset acquired by 
        the receiver under this section shall be valid against 
        the receiver, unless such agreement--
                  [(A) is in writing;
                  [(B) was executed by an authorized officer or 
                representative of the covered financial 
                company, or confirmed in the ordinary course of 
                business by the covered financial company; and
                  [(C) has been, since the time of its 
                execution, an official record of the company or 
                the party claiming under the agreement provides 
                documentation, acceptable to the receiver, of 
                such agreement and its authorized execution or 
                confirmation by the covered financial company.
          [(7) Payment of claims.--
                  [(A) In general.--Subject to subparagraph 
                (B), the Corporation as receiver may, in its 
                discretion and to the extent that funds are 
                available, pay creditor claims, in such manner 
                and amounts as are authorized under this 
                section, which are--
                          [(i) allowed by the receiver;
                          [(ii) approved by the receiver 
                        pursuant to a final determination 
                        pursuant to paragraph (3) or (5), as 
                        applicable; or
                          [(iii) determined by the final 
                        judgment of a court of competent 
                        jurisdiction.
                  [(B) Limitation.--A creditor shall, in no 
                event, receive less than the amount that the 
                creditor is entitled to receive under 
                paragraphs (2) and (3) of subsection (d), as 
                applicable.
                  [(C) Payment of dividends on claims.--The 
                Corporation as receiver may, in its sole 
                discretion, and to the extent otherwise 
                permitted by this section, pay dividends on 
                proven claims at any time, and no liability 
                shall attach to the Corporation as receiver, by 
                reason of any such payment or for failure to 
                pay dividends to a claimant whose claim is not 
                proved at the time of any such payment.
                  [(D) Rulemaking by the corporation.--The 
                Corporation may prescribe such rules, including 
                definitions of terms, as the Corporation deems 
                appropriate to establish an interest rate for 
                or to make payments of post-insolvency interest 
                to creditors holding proven claims against the 
                receivership estate of a covered financial 
                company, except that no such interest shall be 
                paid until the Corporation as receiver has 
                satisfied the principal amount of all creditor 
                claims.
          [(8) Suspension of legal actions.--
                  [(A) In general.--After the appointment of 
                the Corporation as receiver for a covered 
                financial company, the Corporation may request 
                a stay in any judicial action or proceeding in 
                which such covered financial company is or 
                becomes a party, for a period of not to exceed 
                90 days.
                  [(B) Grant of stay by all courts required.--
                Upon receipt of a request by the Corporation 
                pursuant to subparagraph (A), the court shall 
                grant such stay as to all parties.
          [(9) Additional rights and duties.--
                  [(A) Prior final adjudication.--The 
                Corporation shall abide by any final, non-
                appealable judgment of any court of competent 
                jurisdiction that was rendered before the 
                appointment of the Corporation as receiver.
                  [(B) Rights and remedies of receiver.--In the 
                event of any appealable judgment, the 
                Corporation as receiver shall--
                          [(i) have all the rights and remedies 
                        available to the covered financial 
                        company (before the date of appointment 
                        of the Corporation as receiver under 
                        section 202) and the Corporation, 
                        including removal to Federal court and 
                        all appellate rights; and
                          [(ii) not be required to post any 
                        bond in order to pursue such remedies.
                  [(C) No attachment or execution.--No 
                attachment or execution may be issued by any 
                court upon assets in the possession of the 
                Corporation as receiver for a covered financial 
                company.
                  [(D) Limitation on judicial review.--Except 
                as otherwise provided in this title, no court 
                shall have jurisdiction over--
                          [(i) any claim or action for payment 
                        from, or any action seeking a 
                        determination of rights with respect 
                        to, the assets of any covered financial 
                        company for which the Corporation has 
                        been appointed receiver, including any 
                        assets which the Corporation may 
                        acquire from itself as such receiver; 
                        or
                          [(ii) any claim relating to any act 
                        or omission of such covered financial 
                        company or the Corporation as receiver.
                  [(E) Disposition of assets.--In exercising 
                any right, power, privilege, or authority as 
                receiver in connection with any covered 
                financial company for which the Corporation is 
                acting as receiver under this section, the 
                Corporation shall, to the greatest extent 
                practicable, conduct its operations in a manner 
                that--
                          [(i) maximizes the net present value 
                        return from the sale or disposition of 
                        such assets;
                          [(ii) minimizes the amount of any 
                        loss realized in the resolution of 
                        cases;
                          [(iii) mitigates the potential for 
                        serious adverse effects to the 
                        financial system;
                          [(iv) ensures timely and adequate 
                        competition and fair and consistent 
                        treatment of offerors; and
                          [(v) prohibits discrimination on the 
                        basis of race, sex, or ethnic group in 
                        the solicitation and consideration of 
                        offers.
          [(10) Statute of limitations for actions brought by 
        receiver.--
                  [(A) In general.--Notwithstanding any 
                provision of any contract, the applicable 
                statute of limitations with regard to any 
                action brought by the Corporation as receiver 
                for a covered financial company shall be--
                          [(i) in the case of any contract 
                        claim, the longer of--
                                  [(I) the 6-year period 
                                beginning on the date on which 
                                the claim accrues; or
                                  [(II) the period applicable 
                                under State law; and
                          [(ii) in the case of any tort claim, 
                        the longer of--
                                  [(I) the 3-year period 
                                beginning on the date on which 
                                the claim accrues; or
                                  [(II) the period applicable 
                                under State law.
                  [(B) Date on which a claim accrues.--For 
                purposes of subparagraph (A), the date on which 
                the statute of limitations begins to run on any 
                claim described in subparagraph (A) shall be 
                the later of--
                          [(i) the date of the appointment of 
                        the Corporation as receiver under this 
                        title; or
                          [(ii) the date on which the cause of 
                        action accrues.
                  [(C) Revival of expired state causes of 
                action.--
                          [(i) In general.--In the case of any 
                        tort claim described in clause (ii) for 
                        which the applicable statute of 
                        limitations under State law has expired 
                        not more than 5 years before the date 
                        of appointment of the Corporation as 
                        receiver for a covered financial 
                        company, the Corporation may bring an 
                        action as receiver on such claim 
                        without regard to the expiration of the 
                        statute of limitations.
                          [(ii) Claims described.--A tort claim 
                        referred to in clause (i) is a claim 
                        arising from fraud, intentional 
                        misconduct resulting in unjust 
                        enrichment, or intentional misconduct 
                        resulting in substantial loss to the 
                        covered financial company.
          [(11) Avoidable transfers.--
                  [(A) Fraudulent transfers.--The Corporation, 
                as receiver for any covered financial company, 
                may avoid a transfer of any interest of the 
                covered financial company in property, or any 
                obligation incurred by the covered financial 
                company, that was made or incurred at or within 
                2 years before the date on which the 
                Corporation was appointed receiver, if--
                          [(i) the covered financial company 
                        voluntarily or involuntarily--
                                  [(I) made such transfer or 
                                incurred such obligation with 
                                actual intent to hinder, delay, 
                                or defraud any entity to which 
                                the covered financial company 
                                was or became, on or after the 
                                date on which such transfer was 
                                made or such obligation was 
                                incurred, indebted; or
                                  [(II) received less than a 
                                reasonably equivalent value in 
                                exchange for such transferor 
                                obligation; and
                          [(ii) the covered financial company 
                        voluntarily or involuntarily--
                                  [(I) was insolvent on the 
                                date that such transfer was 
                                made or such obligation was 
                                incurred, or became insolvent 
                                as a result of such transfer or 
                                obligation;
                                  [(II) was engaged in business 
                                or a transaction, or was about 
                                to engage in business or a 
                                transaction, for which any 
                                property remaining with the 
                                covered financial company was 
                                an unreasonably small capital;
                                  [(III) intended to incur, or 
                                believed that the covered 
                                financial company would incur, 
                                debts that would be beyond the 
                                ability of the covered 
                                financial company to pay as 
                                such debts matured; or
                                  [(IV) made such transfer to 
                                or for the benefit of an 
                                insider, or incurred such 
                                obligation to or for the 
                                benefit of an insider, under an 
                                employment contract and not in 
                                the ordinary course of 
                                business.
                  [(B) Preferential transfers.--The Corporation 
                as receiver for any covered financial company 
                may avoid a transfer of an interest of the 
                covered financial company in property--
                          [(i) to or for the benefit of a 
                        creditor;
                          [(ii) for or on account of an 
                        antecedent debt that was owed by the 
                        covered financial company before the 
                        transfer was made;
                          [(iii) that was made while the 
                        covered financial company was 
                        insolvent;
                          [(iv) that was made--
                                  [(I) 90 days or less before 
                                the date on which the 
                                Corporation was appointed 
                                receiver; or
                                  [(II) more than 90 days, but 
                                less than 1 year before the 
                                date on which the Corporation 
                                was appointed receiver, if such 
                                creditor at the time of the 
                                transfer was an insider; and
                          [(v) that enables the creditor to 
                        receive more than the creditor would 
                        receive if--
                                  [(I) the covered financial 
                                company had been liquidated 
                                under chapter 7 of the 
                                Bankruptcy Code;
                                  [(II) the transfer had not 
                                been made; and
                                  [(III) the creditor received 
                                payment of such debt to the 
                                extent provided by the 
                                provisions of chapter 7 of the 
                                Bankruptcy Code.
                  [(C) Post-receivership transactions.--The 
                Corporation as receiver for any covered 
                financial company may avoid a transfer of 
                property of the receivership that occurred 
                after the Corporation was appointed receiver 
                that was not authorized under this title by the 
                Corporation as receiver.
                  [(D) Right of recovery.--To the extent that a 
                transfer is avoided under subparagraph (A), 
                (B), or (C), the Corporation may recover, for 
                the benefit of the covered financial company, 
                the property transferred or, if a court so 
                orders, the value of such property (at the time 
                of such transfer) from--
                          [(i) the initial transferee of such 
                        transfer or the person for whose 
                        benefit such transfer was made; or
                          [(ii) any immediate or mediate 
                        transferee of any such initial 
                        transferee.
                  [(E) Rights of transferee or obligee.--The 
                Corporation may not recover under subparagraph 
                (D)(ii) from--
                          [(i) any transferee that takes for 
                        value, including in satisfaction of or 
                        to secure a present or antecedent debt, 
                        in good faith, and without knowledge of 
                        the voidability of the transfer 
                        avoided; or
                          [(ii) any immediate or mediate good 
                        faith transferee of such transferee.
                  [(F) Defenses.--Subject to the other 
                provisions of this title--
                          [(i) a transferee or obligee from 
                        which the Corporation seeks to recover 
                        a transfer or to avoid an obligation 
                        under subparagraph (A), (B), (C), or 
                        (D) shall have the same defenses 
                        available to a transferee or obligee 
                        from which a trustee seeks to recover a 
                        transfer or avoid an obligation under 
                        sections 547, 548, and 549 of the 
                        Bankruptcy Code; and
                          [(ii) the authority of the 
                        Corporation to recover a transfer or 
                        avoid an obligation shall be subject to 
                        subsections (b) and (c) of section 546, 
                        section 547(c), and section 548(c) of 
                        the Bankruptcy Code.
                  [(G) Rights under this section.--The rights 
                of the Corporation as receiver under this 
                section shall be superior to any rights of a 
                trustee or any other party (other than a 
                Federal agency) under the Bankruptcy Code.
                  [(H) Rules of construction; definitions.--For 
                purposes of--
                          [(i) subparagraphs (A) and (B)--
                                  [(I) the term ``insider'' has 
                                the same meaning as in section 
                                101(31) of the Bankruptcy Code;
                                  [(II) a transfer is made when 
                                such transfer is so perfected 
                                that a bona fide purchaser from 
                                the covered financial company 
                                against whom applicable law 
                                permits such transfer to be 
                                perfected cannot acquire an 
                                interest in the property 
                                transferred that is superior to 
                                the interest in such property 
                                of the transferee, but if such 
                                transfer is not so perfected 
                                before the date on which the 
                                Corporation is appointed as 
                                receiver for the covered 
                                financial company, such 
                                transfer is made immediately 
                                before the date of such 
                                appointment; and
                                  [(III) the term ``value'' 
                                means property, or satisfaction 
                                or securing of a present or 
                                antecedent debt of the covered 
                                financial company, but does not 
                                include an unperformed promise 
                                to furnish support to the 
                                covered financial company; and
                          [(ii) subparagraph (B)--
                                  [(I) the covered financial 
                                company is presumed to have 
                                been insolvent on and during 
                                the 90-day period immediately 
                                preceding the date of 
                                appointment of the Corporation 
                                as receiver; and
                                  [(II) the term ``insolvent'' 
                                has the same meaning as in 
                                section 101(32) of the 
                                Bankruptcy Code.
          [(12) Setoff.--
                  [(A) Generally.--Except as otherwise provided 
                in this title, any right of a creditor to 
                offset a mutual debt owed by the creditor to 
                any covered financial company that arose before 
                the Corporation was appointed as receiver for 
                the covered financial company against a claim 
                of such creditor may be asserted if enforceable 
                under applicable noninsolvency law, except to 
                the extent that--
                          [(i) the claim of the creditor 
                        against the covered financial company 
                        is disallowed;
                          [(ii) the claim was transferred, by 
                        an entity other than the covered 
                        financial company, to the creditor--
                                  [(I) after the Corporation 
                                was appointed as receiver of 
                                the covered financial company; 
                                or
                                  [(II)(aa) after the 90-day 
                                period preceding the date on 
                                which the Corporation was 
                                appointed as receiver for the 
                                covered financial company; and
                                  [(bb) while the covered 
                                financial company was insolvent 
                                (except for a setoff in 
                                connection with a qualified 
                                financial contract); or
                          [(iii) the debt owed to the covered 
                        financial company was incurred by the 
                        covered financial company--
                                  [(I) after the 90-day period 
                                preceding the date on which the 
                                Corporation was appointed as 
                                receiver for the covered 
                                financial company;
                                  [(II) while the covered 
                                financial company was 
                                insolvent; and
                                  [(III) for the purpose of 
                                obtaining a right of setoff 
                                against the covered financial 
                                company (except for a setoff in 
                                connection with a qualified 
                                financial contract).
                  [(B) Insufficiency.--
                          [(i) In general.--Except with respect 
                        to a setoff in connection with a 
                        qualified financial contract, if a 
                        creditor offsets a mutual debt owed to 
                        the covered financial company against a 
                        claim of the covered financial company 
                        on or within the 90-day period 
                        preceding the date on which the 
                        Corporation is appointed as receiver 
                        for the covered financial company, the 
                        Corporation may recover from the 
                        creditor the amount so offset, to the 
                        extent that any insufficiency on the 
                        date of such setoff is less than the 
                        insufficiency on the later of--
                                  [(I) the date that is 90 days 
                                before the date on which the 
                                Corporation is appointed as 
                                receiver for the covered 
                                financial company; or
                                  [(II) the first day on which 
                                there is an insufficiency 
                                during the 90-day period 
                                preceding the date on which the 
                                Corporation is appointed as 
                                receiver for the covered 
                                financial company.
                          [(ii) Definition of insufficiency.--
                        In this subparagraph, the term 
                        ``insufficiency'' means the amount, if 
                        any, by which a claim against the 
                        covered financial company exceeds a 
                        mutual debt owed to the covered 
                        financial company by the holder of such 
                        claim.
                  [(C) Insolvency.--The term ``insolvent'' has 
                the same meaning as in section 101(32) of the 
                Bankruptcy Code.
                  [(D) Presumption of insolvency.--For purposes 
                of this paragraph, the covered financial 
                company is presumed to have been insolvent on 
                and during the 90-day period preceding the date 
                of appointment of the Corporation as receiver.
                  [(E) Limitation.--Nothing in this paragraph 
                (12) shall be the basis for any right of setoff 
                where no such right exists under applicable 
                noninsolvency law.
                  [(F) Priority claim.--Except as otherwise 
                provided in this title, the Corporation as 
                receiver for the covered financial company may 
                sell or transfer any assets free and clear of 
                the setoff rights of any party, except that 
                such party shall be entitled to a claim, 
                subordinate to the claims payable under 
                subparagraphs (A), (B), (C), and (D) of 
                subsection (b)(1), but senior to all other 
                unsecured liabilities defined in subsection 
                (b)(1)(E), in an amount equal to the value of 
                such setoff rights.
          [(13) Attachment of assets and other injunctive 
        relief.--Subject to paragraph (14), any court of 
        competent jurisdiction may, at the request of the 
        Corporation as receiver for a covered financial 
        company, issue an order in accordance with Rule 65 of 
        the Federal Rules of Civil Procedure, including an 
        order placing the assets of any person designated by 
        the Corporation under the control of the court and 
        appointing a trustee to hold such assets.
          [(14) Standards.--
                  [(A) Showing.--Rule 65 of the Federal Rules 
                of Civil Procedure shall apply with respect to 
                any proceeding under paragraph (13), without 
                regard to the requirement that the applicant 
                show that the injury, loss, or damage is 
                irreparable and immediate.
                  [(B) State proceeding.--If, in the case of 
                any proceeding in a State court, the court 
                determines that rules of civil procedure 
                available under the laws of the State provide 
                substantially similar protections of the right 
                of the parties to due process as provided under 
                Rule 65 (as modified with respect to such 
                proceeding by subparagraph (A)), the relief 
                sought by the Corporation pursuant to paragraph 
                (14) may be requested under the laws of such 
                State.
          [(15) Treatment of claims arising from breach of 
        contracts executed by the corporation as receiver.--
        Notwithstanding any other provision of this title, any 
        final and non-appealable judgment for monetary damages 
        entered against the Corporation as receiver for a 
        covered financial company for the breach of an 
        agreement executed or approved by the Corporation after 
        the date of its appointment shall be paid as an 
        administrative expense of the receiver. Nothing in this 
        paragraph shall be construed to limit the power of a 
        receiver to exercise any rights under contract or law, 
        including to terminate, breach, cancel, or otherwise 
        discontinue such agreement.
          [(16) Accounting and recordkeeping requirements.--
                  [(A) In general.--The Corporation as receiver 
                for a covered financial company shall, 
                consistent with the accounting and reporting 
                practices and procedures established by the 
                Corporation, maintain a full accounting of each 
                receivership or other disposition of any 
                covered financial company.
                  [(B) Annual accounting or report.--With 
                respect to each receivership to which the 
                Corporation is appointed, the Corporation shall 
                make an annual accounting or report, as 
                appropriate, available to the Secretary and the 
                Comptroller General of the United States.
                  [(C) Availability of reports.--Any report 
                prepared pursuant to subparagraph (B) and 
                section 203(c)(3) shall be made available to 
                the public by the Corporation.
                  [(D) Recordkeeping requirement.--
                          [(i) In general.--The Corporation 
                        shall prescribe such regulations and 
                        establish such retention schedules as 
                        are necessary to maintain the documents 
                        and records of the Corporation 
                        generated in exercising the authorities 
                        of this title and the records of a 
                        covered financial company for which the 
                        Corporation is appointed receiver, with 
                        due regard for--
                                  [(I) the avoidance of 
                                duplicative record retention; 
                                and
                                  [(II) the expected 
                                evidentiary needs of the 
                                Corporation as receiver for a 
                                covered financial company and 
                                the public regarding the 
                                records of covered financial 
                                companies.
                          [(ii) Retention of records.--Unless 
                        otherwise required by applicable 
                        Federal law or court order, the 
                        Corporation may not, at any time, 
                        destroy any records that are subject to 
                        clause (i).
                          [(iii) Records defined.--As used in 
                        this subparagraph, the terms 
                        ``records'' and ``records of a covered 
                        financial company'' mean any document, 
                        book, paper, map, photograph, 
                        microfiche, microfilm, computer or 
                        electronically-created record generated 
                        or maintained by the covered financial 
                        company in the course of and necessary 
                        to its transaction of business.
  [(b) Priority of Expenses and Unsecured Claims.--
          [(1) In general.--Unsecured claims against a covered 
        financial company, or the Corporation as receiver for 
        such covered financial company under this section, that 
        are proven to the satisfaction of the receiver shall 
        have priority in the following order:
                  [(A) Administrative expenses of the receiver.
                  [(B) Any amounts owed to the United States, 
                unless the United States agrees or consents 
                otherwise.
                  [(C) Wages, salaries, or commissions, 
                including vacation, severance, and sick leave 
                pay earned by an individual (other than an 
                individual described in subparagraph (G)), but 
                only to the extent of 11,725 for each 
                individual (as indexed for inflation, by 
                regulation of the Corporation) earned not later 
                than 180 days before the date of appointment of 
                the Corporation as receiver.
                  [(D) Contributions owed to employee benefit 
                plans arising from services rendered not later 
                than 180 days before the date of appointment of 
                the Corporation as receiver, to the extent of 
                the number of employees covered by each such 
                plan, multiplied by 11,725 (as indexed for 
                inflation, by regulation of the Corporation), 
                less the aggregate amount paid to such 
                employees under subparagraph (C), plus the 
                aggregate amount paid by the receivership on 
                behalf of such employees to any other employee 
                benefit plan.
                  [(E) Any other general or senior liability of 
                the covered financial company (which is not a 
                liability described under subparagraph (F), 
                (G), or (H)).
                  [(F) Any obligation subordinated to general 
                creditors (which is not an obligation described 
                under subparagraph (G) or (H)).
                  [(G) Any wages, salaries, or commissions, 
                including vacation, severance, and sick leave 
                pay earned, owed to senior executives and 
                directors of the covered financial company.
                  [(H) Any obligation to shareholders, members, 
                general partners, limited partners, or other 
                persons, with interests in the equity of the 
                covered financial company arising as a result 
                of their status as shareholders, members, 
                general partners, limited partners, or other 
                persons with interests in the equity of the 
                covered financial company.
          [(2) Post-receivership financing priority.--In the 
        event that the Corporation, as receiver for a covered 
        financial company, is unable to obtain unsecured credit 
        for the covered financial company from commercial 
        sources, the Corporation as receiver may obtain credit 
        or incur debt on the part of the covered financial 
        company, which shall have priority over any or all 
        administrative expenses of the receiver under paragraph 
        (1)(A).
          [(3) Claims of the united states.--Unsecured claims 
        of the United States shall, at a minimum, have a higher 
        priority than liabilities of the covered financial 
        company that count as regulatory capital.
          [(4) Creditors similarly situated.--All claimants of 
        a covered financial company that are similarly situated 
        under paragraph (1) shall be treated in a similar 
        manner, except that the Corporation may take any action 
        (including making payments, subject to subsection 
        (o)(1)(D)(i)) that does not comply with this 
        subsection, if--
                  [(A) the Corporation determines that such 
                action is necessary--
                          [(i) to maximize the value of the 
                        assets of the covered financial 
                        company;
                          [(ii) to initiate and continue 
                        operations essential to implementation 
                        of the receivership or any bridge 
                        financial company;
                          [(iii) to maximize the present value 
                        return from the sale or other 
                        disposition of the assets of the 
                        covered financial company; or
                          [(iv) to minimize the amount of any 
                        loss realized upon the sale or other 
                        disposition of the assets of the 
                        covered financial company; and
                  [(B) all claimants that are similarly 
                situated under paragraph (1) receive not less 
                than the amount provided in paragraphs (2) and 
                (3) of subsection (d).
          [(5) Secured claims unaffected.--This section shall 
        not affect secured claims or security entitlements in 
        respect of assets or property held by the covered 
        financial company, except to the extent that the 
        security is insufficient to satisfy the claim, and then 
        only with regard to the difference between the claim 
        and the amount realized from the security.
          [(6) Priority of expenses and unsecured claims in the 
        orderly liquidation of sipc member.--Where the 
        Corporation is appointed as receiver for a covered 
        broker or dealer, unsecured claims against such covered 
        broker or dealer, or the Corporation as receiver for 
        such covered broker or dealer under this section, that 
        are proven to the satisfaction of the receiver under 
        section 205(e), shall have the priority prescribed in 
        paragraph (1), except that--
                  [(A) SIPC shall be entitled to recover 
                administrative expenses incurred in performing 
                its responsibilities under section 205 on an 
                equal basis with the Corporation, in accordance 
                with paragraph (1)(A);
                  [(B) the Corporation shall be entitled to 
                recover any amounts paid to customers or to 
                SIPC pursuant to section 205(f), in accordance 
                with paragraph (1)(B);
                  [(C) SIPC shall be entitled to recover any 
                amounts paid out of the SIPC Fund to meet its 
                obligations under section 205 and under the 
                Securities Investor Protection Act of 1970 (15 
                U.S.C. 78aaa et seq.), which claim shall be 
                subordinate to the claims payable under 
                subparagraphs (A) and (B) of paragraph (1), but 
                senior to all other claims; and
                  [(D) the Corporation may, after paying any 
                proven claims to customers under section 205 
                and the Securities Investor Protection Act of 
                1970 (15 U.S.C. 78aaa et seq.), and as provided 
                above, pay dividends on other proven claims, in 
                its discretion, and to the extent that funds 
                are available, in accordance with the 
                priorities set forth in paragraph (1).
  [(c) Provisions Relating to Contracts Entered Into Before 
Appointment of Receiver.--
          [(1) Authority to repudiate contracts.--In addition 
        to any other rights that a receiver may have, the 
        Corporation as receiver for any covered financial 
        company may disaffirm or repudiate any contract or 
        lease--
                  [(A) to which the covered financial company 
                is a party;
                  [(B) the performance of which the Corporation 
                as receiver, in the discretion of the 
                Corporation, determines to be burdensome; and
                  [(C) the disaffirmance or repudiation of 
                which the Corporation as receiver determines, 
                in the discretion of the Corporation, will 
                promote the orderly administration of the 
                affairs of the covered financial company.
          [(2) Timing of repudiation.--The Corporation, as 
        receiver for any covered financial company, shall 
        determine whether or not to exercise the rights of 
        repudiation under this section within a reasonable 
        period of time.
          [(3) Claims for damages for repudiation.--
                  [(A) In general.--Except as provided in 
                paragraphs (4), (5), and (6) and in 
                subparagraphs (C), (D), and (E) of this 
                paragraph, the liability of the Corporation as 
                receiver for a covered financial company for 
                the disaffirmance or repudiation of any 
                contract pursuant to paragraph (1) shall be--
                          [(i) limited to actual direct 
                        compensatory damages; and
                          [(ii) determined as of--
                                  [(I) the date of the 
                                appointment of the Corporation 
                                as receiver; or
                                  [(II) in the case of any 
                                contract or agreement referred 
                                to in paragraph (8), the date 
                                of the disaffirmance or 
                                repudiation of such contract or 
                                agreement.
                  [(B) No liability for other damages.--For 
                purposes of subparagraph (A), the term ``actual 
                direct compensatory damages'' does not 
                include--
                          [(i) punitive or exemplary damages;
                          [(ii) damages for lost profits or 
                        opportunity; or
                          [(iii) damages for pain and 
                        suffering.
                  [(C) Measure of damages for repudiation of 
                qualified financial contracts.--In the case of 
                any qualified financial contract or agreement 
                to which paragraph (8) applies, compensatory 
                damages shall be--
                          [(i) deemed to include normal and 
                        reasonable costs of cover or other 
                        reasonable measures of damages utilized 
                        in the industries for such contract and 
                        agreement claims; and
                          [(ii) paid in accordance with this 
                        paragraph and subsection (d), except as 
                        otherwise specifically provided in this 
                        subsection.
                  [(D) Measure of damages for repudiation or 
                disaffirmance of debt obligation.--In the case 
                of any debt for borrowed money or evidenced by 
                a security, actual direct compensatory damages 
                shall be no less than the amount lent plus 
                accrued interest plus any accreted original 
                issue discount as of the date the Corporation 
                was appointed receiver of the covered financial 
                company and, to the extent that an allowed 
                secured claim is secured by property the value 
                of which is greater than the amount of such 
                claim and any accrued interest through the date 
                of repudiation or disaffirmance, such accrued 
                interest pursuant to paragraph (1).
                  [(E) Measure of damages for repudiation or 
                disaffirmance of contingent obligation.--In the 
                case of any contingent obligation of a covered 
                financial company consisting of any obligation 
                under a guarantee, letter of credit, loan 
                commitment, or similar credit obligation, the 
                Corporation may, by rule or regulation, 
                prescribe that actual direct compensatory 
                damages shall be no less than the estimated 
                value of the claim as of the date the 
                Corporation was appointed receiver of the 
                covered financial company, as such value is 
                measured based on the likelihood that such 
                contingent claim would become fixed and the 
                probable magnitude thereof.
          [(4) Leases under which the covered financial company 
        is the lessee.--
                  [(A) In general.--If the Corporation as 
                receiver disaffirms or repudiates a lease under 
                which the covered financial company is the 
                lessee, the receiver shall not be liable for 
                any damages (other than damages determined 
                pursuant to subparagraph (B)) for the 
                disaffirmance or repudiation of such lease.
                  [(B) Payments of rent.--Notwithstanding 
                subparagraph (A), the lessor under a lease to 
                which subparagraph (A) would otherwise apply 
                shall--
                          [(i) be entitled to the contractual 
                        rent accruing before the later of the 
                        date on which--
                                  [(I) the notice of 
                                disaffirmance or repudiation is 
                                mailed; or
                                  [(II) the disaffirmance or 
                                repudiation becomes effective, 
                                unless the lessor is in default 
                                or breach of the terms of the 
                                lease;
                          [(ii) have no claim for damages under 
                        any acceleration clause or other 
                        penalty provision in the lease; and
                          [(iii) have a claim for any unpaid 
                        rent, subject to all appropriate 
                        offsets and defenses, due as of the 
                        date of the appointment which shall be 
                        paid in accordance with this paragraph 
                        and subsection (d).
          [(5) Leases under which the covered financial company 
        is the lessor.--
                  [(A) In general.--If the Corporation as 
                receiver for a covered financial company 
                repudiates an unexpired written lease of real 
                property of the covered financial company under 
                which the covered financial company is the 
                lessor and the lessee is not, as of the date of 
                such repudiation, in default, the lessee under 
                such lease may either--
                          [(i) treat the lease as terminated by 
                        such repudiation; or
                          [(ii) remain in possession of the 
                        leasehold interest for the balance of 
                        the term of the lease, unless the 
                        lessee defaults under the terms of the 
                        lease after the date of such 
                        repudiation.
                  [(B) Provisions applicable to lessee 
                remaining in possession.--If any lessee under a 
                lease described in subparagraph (A) remains in 
                possession of a leasehold interest pursuant to 
                clause (ii) of subparagraph (A)--
                          [(i) the lessee--
                                  [(I) shall continue to pay 
                                the contractual rent pursuant 
                                to the terms of the lease after 
                                the date of the repudiation of 
                                such lease; and
                                  [(II) may offset against any 
                                rent payment which accrues 
                                after the date of the 
                                repudiation of the lease, any 
                                damages which accrue after such 
                                date due to the nonperformance 
                                of any obligation of the 
                                covered financial company under 
                                the lease after such date; and
                          [(ii) the Corporation as receiver 
                        shall not be liable to the lessee for 
                        any damages arising after such date as 
                        a result of the repudiation, other than 
                        the amount of any offset allowed under 
                        clause (i)(II).
          [(6) Contracts for the sale of real property.--
                  [(A) In general.--If the receiver repudiates 
                any contract (which meets the requirements of 
                subsection (a)(6)) for the sale of real 
                property, and the purchaser of such real 
                property under such contract is in possession 
                and is not, as of the date of such repudiation, 
                in default, such purchaser may either--
                          [(i) treat the contract as terminated 
                        by such repudiation; or
                          [(ii) remain in possession of such 
                        real property.
                  [(B) Provisions applicable to purchaser 
                remaining in possession.--If any purchaser of 
                real property under any contract described in 
                subparagraph (A) remains in possession of such 
                property pursuant to clause (ii) of 
                subparagraph (A)--
                          [(i) the purchaser--
                                  [(I) shall continue to make 
                                all payments due under the 
                                contract after the date of the 
                                repudiation of the contract; 
                                and
                                  [(II) may offset against any 
                                such payments any damages which 
                                accrue after such date due to 
                                the nonperformance (after such 
                                date) of any obligation of the 
                                covered financial company under 
                                the contract; and
                          [(ii) the Corporation as receiver 
                        shall--
                                  [(I) not be liable to the 
                                purchaser for any damages 
                                arising after such date as a 
                                result of the repudiation, 
                                other than the amount of any 
                                offset allowed under clause 
                                (i)(II);
                                  [(II) deliver title to the 
                                purchaser in accordance with 
                                the provisions of the contract; 
                                and
                                  [(III) have no obligation 
                                under the contract other than 
                                the performance required under 
                                subclause (II).
                  [(C) Assignment and sale allowed.--
                          [(i) In general.--No provision of 
                        this paragraph shall be construed as 
                        limiting the right of the Corporation 
                        as receiver to assign the contract 
                        described in subparagraph (A) and sell 
                        the property, subject to the contract 
                        and the provisions of this paragraph.
                          [(ii) No liability after assignment 
                        and sale.--If an assignment and sale 
                        described in clause (i) is consummated, 
                        the Corporation as receiver shall have 
                        no further liability under the contract 
                        described in subparagraph (A) or with 
                        respect to the real property which was 
                        the subject of such contract.
          [(7) Provisions applicable to service contracts.--
                  [(A) Services performed before appointment.--
                In the case of any contract for services 
                between any person and any covered financial 
                company for which the Corporation has been 
                appointed receiver, any claim of such person 
                for services performed before the date of 
                appointment shall be--
                          [(i) a claim to be paid in accordance 
                        with subsections (a), (b), and (d); and
                          [(ii) deemed to have arisen as of the 
                        date on which the receiver was 
                        appointed.
                  [(B) Services performed after appointment and 
                prior to repudiation.--If, in the case of any 
                contract for services described in subparagraph 
                (A), the Corporation as receiver accepts 
                performance by the other person before making 
                any determination to exercise the right of 
                repudiation of such contract under this 
                section--
                          [(i) the other party shall be paid 
                        under the terms of the contract for the 
                        services performed; and
                          [(ii) the amount of such payment 
                        shall be treated as an administrative 
                        expense of the receivership.
                  [(C) Acceptance of performance no bar to 
                subsequent repudiation.--The acceptance by the 
                Corporation as receiver for services referred 
                to in subparagraph (B) in connection with a 
                contract described in subparagraph (B) shall 
                not affect the right of the Corporation as 
                receiver to repudiate such contract under this 
                section at any time after such performance.
          [(8) Certain qualified financial contracts.--
                  [(A) Rights of parties to contracts.--Subject 
                to subsection (a)(8) and paragraphs (9) and 
                (10) of this subsection, and notwithstanding 
                any other provision of this section, any other 
                provision of Federal law, or the law of any 
                State, no person shall be stayed or prohibited 
                from exercising--
                          [(i) any right that such person has 
                        to cause the termination, liquidation, 
                        or acceleration of any qualified 
                        financial contract with a covered 
                        financial company which arises upon the 
                        date of appointment of the Corporation 
                        as receiver for such covered financial 
                        company or at any time after such 
                        appointment;
                          [(ii) any right under any security 
                        agreement or arrangement or other 
                        credit enhancement related to one or 
                        more qualified financial contracts 
                        described in clause (i); or
                          [(iii) any right to offset or net out 
                        any termination value, payment amount, 
                        or other transfer obligation arising 
                        under or in connection with 1 or more 
                        contracts or agreements described in 
                        clause (i), including any master 
                        agreement for such contracts or 
                        agreements.
                  [(B) Applicability of other provisions.--
                Subsection (a)(8) shall apply in the case of 
                any judicial action or proceeding brought 
                against the Corporation as receiver referred to 
                in subparagraph (A), or the subject covered 
                financial company, by any party to a contract 
                or agreement described in subparagraph (A)(i) 
                with such covered financial company.
                  [(C) Certain transfers not avoidable.--
                          [(i) In general.--Notwithstanding 
                        subsection (a)(11), (a)(12), or 
                        (c)(12), section 5242 of the Revised 
                        Statutes of the United States, or any 
                        other provision of Federal or State law 
                        relating to the avoidance of 
                        preferential or fraudulent transfers, 
                        the Corporation, whether acting as the 
                        Corporation or as receiver for a 
                        covered financial company, may not 
                        avoid any transfer of money or other 
                        property in connection with any 
                        qualified financial contract with a 
                        covered financial company.
                          [(ii) Exception for certain 
                        transfers.--Clause (i) shall not apply 
                        to any transfer of money or other 
                        property in connection with any 
                        qualified financial contract with a 
                        covered financial company if the 
                        transferee had actual intent to hinder, 
                        delay, or defraud such company, the 
                        creditors of such company, or the 
                        Corporation as receiver appointed for 
                        such company.
                  [(D) Certain contracts and agreements 
                defined.--For purposes of this subsection, the 
                following definitions shall apply:
                          [(i) Qualified financial contract.--
                        The term ``qualified financial 
                        contract'' means any securities 
                        contract, commodity contract, forward 
                        contract, repurchase agreement, swap 
                        agreement, and any similar agreement 
                        that the Corporation determines by 
                        regulation, resolution, or order to be 
                        a qualified financial contract for 
                        purposes of this paragraph.
                          [(ii) Securities contract.--The term 
                        ``securities contract''--
                                  [(I) means a contract for the 
                                purchase, sale, or loan of a 
                                security, a certificate of 
                                deposit, a mortgage loan, any 
                                interest in a mortgage loan, a 
                                group or index of securities, 
                                certificates of deposit, or 
                                mortgage loans or interests 
                                therein (including any interest 
                                therein or based on the value 
                                thereof), or any option on any 
                                of the foregoing, including any 
                                option to purchase or sell any 
                                such security, certificate of 
                                deposit, mortgage loan, 
                                interest, group or index, or 
                                option, and including any 
                                repurchase or reverse 
                                repurchase transaction on any 
                                such security, certificate of 
                                deposit, mortgage loan, 
                                interest, group or index, or 
                                option (whether or not such 
                                repurchase or reverse 
                                repurchase transaction is a 
                                ``repurchase agreement'', as 
                                defined in clause (v));
                                  [(II) does not include any 
                                purchase, sale, or repurchase 
                                obligation under a 
                                participation in a commercial 
                                mortgage loan unless the 
                                Corporation determines by 
                                regulation, resolution, or 
                                order to include any such 
                                agreement within the meaning of 
                                such term;
                                  [(III) means any option 
                                entered into on a national 
                                securities exchange relating to 
                                foreign currencies;
                                  [(IV) means the guarantee 
                                (including by novation) by or 
                                to any securities clearing 
                                agency of any settlement of 
                                cash, securities, certificates 
                                of deposit, mortgage loans or 
                                interests therein, group or 
                                index of securities, 
                                certificates of deposit or 
                                mortgage loans or interests 
                                therein (including any interest 
                                therein or based on the value 
                                thereof) or an option on any of 
                                the foregoing, including any 
                                option to purchase or sell any 
                                such security, certificate of 
                                deposit, mortgage loan, 
                                interest, group or index, or 
                                option (whether or not such 
                                settlement is in connection 
                                with any agreement or 
                                transaction referred to in 
                                subclauses (I) through (XII) 
                                (other than subclause (II)));
                                  [(V) means any margin loan;
                                  [(VI) means any extension of 
                                credit for the clearance or 
                                settlement of securities 
                                transactions;
                                  [(VII) means any loan 
                                transaction coupled with a 
                                securities collar transaction, 
                                any prepaid securities forward 
                                transaction, or any total 
                                return swap transaction coupled 
                                with a securities sale 
                                transaction;
                                  [(VIII) means any other 
                                agreement or transaction that 
                                is similar to any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(IX) means any combination 
                                of the agreements or 
                                transactions referred to in 
                                this clause;
                                  [(X) means any option to 
                                enter into any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(XI) means a master 
                                agreement that provides for an 
                                agreement or transaction 
                                referred to in any of 
                                subclauses (I) through (X), 
                                other than subclause (II), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a securities 
                                contract under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a securities contract 
                                under this clause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in any of subclauses (I) 
                                through (X), other than 
                                subclause (II); and
                                  [(XII) means any security 
                                agreement or arrangement or 
                                other credit enhancement 
                                related to any agreement or 
                                transaction referred to in this 
                                clause, including any guarantee 
                                or reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                this clause.
                          [(iii) Commodity contract.--The term 
                        ``commodity contract'' means--
                                  [(I) with respect to a 
                                futures commission merchant, a 
                                contract for the purchase or 
                                sale of a commodity for future 
                                delivery on, or subject to the 
                                rules of, a contract market or 
                                board of trade;
                                  [(II) with respect to a 
                                foreign futures commission 
                                merchant, a foreign future;
                                  [(III) with respect to a 
                                leverage transaction merchant, 
                                a leverage transaction;
                                  [(IV) with respect to a 
                                clearing organization, a 
                                contract for the purchase or 
                                sale of a commodity for future 
                                delivery on, or subject to the 
                                rules of, a contract market or 
                                board of trade that is cleared 
                                by such clearing organization, 
                                or commodity option traded on, 
                                or subject to the rules of, a 
                                contract market or board of 
                                trade that is cleared by such 
                                clearing organization;
                                  [(V) with respect to a 
                                commodity options dealer, a 
                                commodity option;
                                  [(VI) any other agreement or 
                                transaction that is similar to 
                                any agreement or transaction 
                                referred to in this clause;
                                  [(VII) any combination of the 
                                agreements or transactions 
                                referred to in this clause;
                                  [(VIII) any option to enter 
                                into any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(IX) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in any 
                                of subclauses (I) through 
                                (VIII), together with all 
                                supplements to any such master 
                                agreement, without regard to 
                                whether the master agreement 
                                provides for an agreement or 
                                transaction that is not a 
                                commodity contract under this 
                                clause, except that the master 
                                agreement shall be considered 
                                to be a commodity contract 
                                under this clause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in any of subclauses (I) 
                                through (VIII); or
                                  [(X) any security agreement 
                                or arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in this clause, 
                                including any guarantee or 
                                reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                this clause.
                          [(iv) Forward contract.--The term 
                        ``forward contract'' means--
                                  [(I) a contract (other than a 
                                commodity contract) for the 
                                purchase, sale, or transfer of 
                                a commodity or any similar 
                                good, article, service, right, 
                                or interest which is presently 
                                or in the future becomes the 
                                subject of dealing in the 
                                forward contract trade, or 
                                product or byproduct thereof, 
                                with a maturity date that is 
                                more than 2 days after the date 
                                on which the contract is 
                                entered into, including a 
                                repurchase or reverse 
                                repurchase transaction (whether 
                                or not such repurchase or 
                                reverse repurchase transaction 
                                is a ``repurchase agreement'', 
                                as defined in clause (v)), 
                                consignment, lease, swap, hedge 
                                transaction, deposit, loan, 
                                option, allocated transaction, 
                                unallocated transaction, or any 
                                other similar agreement;
                                  [(II) any combination of 
                                agreements or transactions 
                                referred to in subclauses (I) 
                                and (III);
                                  [(III) any option to enter 
                                into any agreement or 
                                transaction referred to in 
                                subclause (I) or (II);
                                  [(IV) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in 
                                subclause (I), (II), or (III), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a forward contract 
                                under this clause, except that 
                                the master agreement shall be 
                                considered to be a forward 
                                contract under this clause only 
                                with respect to each agreement 
                                or transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (II), or 
                                (III); or
                                  [(V) any security agreement 
                                or arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in subclause (I), 
                                (II), (III), or (IV), including 
                                any guarantee or reimbursement 
                                obligation in connection with 
                                any agreement or transaction 
                                referred to in any such 
                                subclause.
                          [(v) Repurchase agreement.--The term 
                        ``repurchase agreement'' (which 
                        definition also applies to a reverse 
                        repurchase agreement)--
                                  [(I) means an agreement, 
                                including related terms, which 
                                provides for the transfer of 
                                one or more certificates of 
                                deposit, mortgage related 
                                securities (as such term is 
                                defined in section 3 of the 
                                Securities Exchange Act of 
                                1934), mortgage loans, 
                                interests in mortgage-related 
                                securities or mortgage loans, 
                                eligible bankers' acceptances, 
                                qualified foreign government 
                                securities (which, for purposes 
                                of this clause, means a 
                                security that is a direct 
                                obligation of, or that is fully 
                                guaranteed by, the central 
                                government of a member of the 
                                Organization for Economic 
                                Cooperation and Development, as 
                                determined by regulation or 
                                order adopted by the Board of 
                                Governors), or securities that 
                                are direct obligations of, or 
                                that are fully guaranteed by, 
                                the United States or any agency 
                                of the United States against 
                                the transfer of funds by the 
                                transferee of such certificates 
                                of deposit, eligible bankers' 
                                acceptances, securities, 
                                mortgage loans, or interests 
                                with a simultaneous agreement 
                                by such transferee to transfer 
                                to the transferor thereof 
                                certificates of deposit, 
                                eligible bankers' acceptances, 
                                securities, mortgage loans, or 
                                interests as described above, 
                                at a date certain not later 
                                than 1 year after such 
                                transfers or on demand, against 
                                the transfer of funds, or any 
                                other similar agreement;
                                  [(II) does not include any 
                                repurchase obligation under a 
                                participation in a commercial 
                                mortgage loan, unless the 
                                Corporation determines, by 
                                regulation, resolution, or 
                                order to include any such 
                                participation within the 
                                meaning of such term;
                                  [(III) means any combination 
                                of agreements or transactions 
                                referred to in subclauses (I) 
                                and (IV);
                                  [(IV) means any option to 
                                enter into any agreement or 
                                transaction referred to in 
                                subclause (I) or (III);
                                  [(V) means a master agreement 
                                that provides for an agreement 
                                or transaction referred to in 
                                subclause (I), (III), or (IV), 
                                together with all supplements 
                                to any such master agreement, 
                                without regard to whether the 
                                master agreement provides for 
                                an agreement or transaction 
                                that is not a repurchase 
                                agreement under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a repurchase agreement 
                                under this subclause only with 
                                respect to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (III), or 
                                (IV); and
                                  [(VI) means any security 
                                agreement or arrangement or 
                                other credit enhancement 
                                related to any agreement or 
                                transaction referred to in 
                                subclause (I), (III), (IV), or 
                                (V), including any guarantee or 
                                reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                any such subclause.
                          [(vi) Swap agreement.--The term 
                        ``swap agreement'' means--
                                  [(I) any agreement, including 
                                the terms and conditions 
                                incorporated by reference in 
                                any such agreement, which is an 
                                interest rate swap, option, 
                                future, or forward agreement, 
                                including a rate floor, rate 
                                cap, rate collar, cross-
                                currency rate swap, and basis 
                                swap; a spot, same day-
                                tomorrow, tomorrow-next, 
                                forward, or other foreign 
                                exchange, precious metals, or 
                                other commodity agreement; a 
                                currency swap, option, future, 
                                or forward agreement; an equity 
                                index or equity swap, option, 
                                future, or forward agreement; a 
                                debt index or debt swap, 
                                option, future, or forward 
                                agreement; a total return, 
                                credit spread or credit swap, 
                                option, future, or forward 
                                agreement; a commodity index or 
                                commodity swap, option, future, 
                                or forward agreement; weather 
                                swap, option, future, or 
                                forward agreement; an emissions 
                                swap, option, future, or 
                                forward agreement; or an 
                                inflation swap, option, future, 
                                or forward agreement;
                                  [(II) any agreement or 
                                transaction that is similar to 
                                any other agreement or 
                                transaction referred to in this 
                                clause and that is of a type 
                                that has been, is presently, or 
                                in the future becomes, the 
                                subject of recurrent dealings 
                                in the swap or other 
                                derivatives markets (including 
                                terms and conditions 
                                incorporated by reference in 
                                such agreement) and that is a 
                                forward, swap, future, option, 
                                or spot transaction on one or 
                                more rates, currencies, 
                                commodities, equity securities 
                                or other equity instruments, 
                                debt securities or other debt 
                                instruments, quantitative 
                                measures associated with an 
                                occurrence, extent of an 
                                occurrence, or contingency 
                                associated with a financial, 
                                commercial, or economic 
                                consequence, or economic or 
                                financial indices or measures 
                                of economic or financial risk 
                                or value;
                                  [(III) any combination of 
                                agreements or transactions 
                                referred to in this clause;
                                  [(IV) any option to enter 
                                into any agreement or 
                                transaction referred to in this 
                                clause;
                                  [(V) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in 
                                subclause (I), (II), (III), or 
                                (IV), together with all 
                                supplements to any such master 
                                agreement, without regard to 
                                whether the master agreement 
                                contains an agreement or 
                                transaction that is not a swap 
                                agreement under this clause, 
                                except that the master 
                                agreement shall be considered 
                                to be a swap agreement under 
                                this clause only with respect 
                                to each agreement or 
                                transaction under the master 
                                agreement that is referred to 
                                in subclause (I), (II), (III), 
                                or (IV); and
                                  [(VI) any security agreement 
                                or arrangement or other credit 
                                enhancement related to any 
                                agreement or transaction 
                                referred to in any of 
                                subclauses (I) through (V), 
                                including any guarantee or 
                                reimbursement obligation in 
                                connection with any agreement 
                                or transaction referred to in 
                                any such clause.
                          [(vii) Definitions relating to 
                        default.--When used in this paragraph 
                        and paragraphs (9) and (10)--
                                  [(I) the term ``default'' 
                                means, with respect to a 
                                covered financial company, any 
                                adjudication or other official 
                                decision by any court of 
                                competent jurisdiction, or 
                                other public authority pursuant 
                                to which the Corporation has 
                                been appointed receiver; and
                                  [(II) the term ``in danger of 
                                default'' means a covered 
                                financial company with respect 
                                to which the Corporation or 
                                appropriate State authority has 
                                determined that--
                                          [(aa) in the opinion 
                                        of the Corporation or 
                                        such authority--
                                                  [(AA) the 
                                                covered 
                                                financial 
                                                company is not 
                                                likely to be 
                                                able to pay its 
                                                obligations in 
                                                the normal 
                                                course of 
                                                business; and
                                                  [(BB) there 
                                                is no 
                                                reasonable 
                                                prospect that 
                                                the covered 
                                                financial 
                                                company will be 
                                                able to pay 
                                                such 
                                                obligations 
                                                without Federal 
                                                assistance; or
                                          [(bb) in the opinion 
                                        of the Corporation or 
                                        such authority--
                                                  [(AA) the 
                                                covered 
                                                financial 
                                                company has 
                                                incurred or is 
                                                likely to incur 
                                                losses that 
                                                will deplete 
                                                all or 
                                                substantially 
                                                all of its 
                                                capital; and
                                                  [(BB) there 
                                                is no 
                                                reasonable 
                                                prospect that 
                                                the capital 
                                                will be 
                                                replenished 
                                                without Federal 
                                                assistance.
                          [(viii) Treatment of master agreement 
                        as one agreement.--Any master agreement 
                        for any contract or agreement described 
                        in any of clauses (i) through (vi) (or 
                        any master agreement for such master 
                        agreement or agreements), together with 
                        all supplements to such master 
                        agreement, shall be treated as a single 
                        agreement and a single qualified 
                        financial contact. If a master 
                        agreement contains provisions relating 
                        to agreements or transactions that are 
                        not themselves qualified financial 
                        contracts, the master agreement shall 
                        be deemed to be a qualified financial 
                        contract only with respect to those 
                        transactions that are themselves 
                        qualified financial contracts.
                          [(ix) Transfer.--The term 
                        ``transfer'' means every mode, direct 
                        or indirect, absolute or conditional, 
                        voluntary or involuntary, of disposing 
                        of or parting with property or with an 
                        interest in property, including 
                        retention of title as a security 
                        interest and foreclosure of the equity 
                        of redemption of the covered financial 
                        company.
                          [(x) Person.--The term ``person'' 
                        includes any governmental entity in 
                        addition to any entity included in the 
                        definition of such term in section 1, 
                        title 1, United States Code.
                  [(E) Clarification.--No provision of law 
                shall be construed as limiting the right or 
                power of the Corporation, or authorizing any 
                court or agency to limit or delay, in any 
                manner, the right or power of the Corporation 
                to transfer any qualified financial contract or 
                to disaffirm or repudiate any such contract in 
                accordance with this subsection.
                  [(F) Walkaway clauses not effective.--
                          [(i) In general.--Notwithstanding the 
                        provisions of subparagraph (A) of this 
                        paragraph and sections 403 and 404 of 
                        the Federal Deposit Insurance 
                        Corporation Improvement Act of 1991, no 
                        walkaway clause shall be enforceable in 
                        a qualified financial contract of a 
                        covered financial company in default.
                          [(ii) Limited suspension of certain 
                        obligations.--In the case of a 
                        qualified financial contract referred 
                        to in clause (i), any payment or 
                        delivery obligations otherwise due from 
                        a party pursuant to the qualified 
                        financial contract shall be suspended 
                        from the time at which the Corporation 
                        is appointed as receiver until the 
                        earlier of--
                                  [(I) the time at which such 
                                party receives notice that such 
                                contract has been transferred 
                                pursuant to paragraph (10)(A); 
                                or
                                  [(II) 5:00 p.m. (eastern 
                                time) on the business day 
                                following the date of the 
                                appointment of the Corporation 
                                as receiver.
                          [(iii) Walkaway clause defined.--For 
                        purposes of this subparagraph, the term 
                        ``walkaway clause'' means any provision 
                        in a qualified financial contract that 
                        suspends, conditions, or extinguishes a 
                        payment obligation of a party, in whole 
                        or in part, or does not create a 
                        payment obligation of a party that 
                        would otherwise exist, solely because 
                        of the status of such party as a 
                        nondefaulting party in connection with 
                        the insolvency of a covered financial 
                        company that is a party to the contract 
                        or the appointment of or the exercise 
                        of rights or powers by the Corporation 
                        as receiver for such covered financial 
                        company, and not as a result of the 
                        exercise by a party of any right to 
                        offset, setoff, or net obligations that 
                        exist under the contract, any other 
                        contract between those parties, or 
                        applicable law.
                  [(G) Certain obligations to clearing 
                organizations.--In the event that the 
                Corporation has been appointed as receiver for 
                a covered financial company which is a party to 
                any qualified financial contract cleared by or 
                subject to the rules of a clearing organization 
                (as defined in paragraph (9)(D)), the receiver 
                shall use its best efforts to meet all margin, 
                collateral, and settlement obligations of the 
                covered financial company that arise under 
                qualified financial contracts (other than any 
                margin, collateral, or settlement obligation 
                that is not enforceable against the receiver 
                under paragraph (8)(F)(i) or paragraph 
                (10)(B)), as required by the rules of the 
                clearing organization when due. Notwithstanding 
                any other provision of this title, if the 
                receiver fails to satisfy any such margin, 
                collateral, or settlement obligations under the 
                rules of the clearing organization, the 
                clearing organization shall have the immediate 
                right to exercise, and shall not be stayed from 
                exercising, all of its rights and remedies 
                under its rules and applicable law with respect 
                to any qualified financial contract of the 
                covered financial company, including, without 
                limitation, the right to liquidate all 
                positions and collateral of such covered 
                financial company under the company's qualified 
                financial contracts, and suspend or cease to 
                act for such covered financial company, all in 
                accordance with the rules of the clearing 
                organization.
                  [(H) Recordkeeping.--
                          [(i) Joint rulemaking.--The Federal 
                        primary financial regulatory agencies 
                        shall jointly prescribe regulations 
                        requiring that financial companies 
                        maintain such records with respect to 
                        qualified financial contracts 
                        (including market valuations) that the 
                        Federal primary financial regulatory 
                        agencies determine to be necessary or 
                        appropriate in order to assist the 
                        Corporation as receiver for a covered 
                        financial company in being able to 
                        exercise its rights and fulfill its 
                        obligations under this paragraph or 
                        paragraph (9) or (10).
                          [(ii) Time frame.--The Federal 
                        primary financial regulatory agencies 
                        shall prescribe joint final or interim 
                        final regulations not later than 24 
                        months after the date of enactment of 
                        this Act.
                          [(iii) Back-up rulemaking 
                        authority.--If the Federal primary 
                        financial regulatory agencies do not 
                        prescribe joint final or interim final 
                        regulations within the time frame in 
                        clause (ii), the Chairperson of the 
                        Council shall prescribe, in 
                        consultation with the Corporation, the 
                        regulations required by clause (i).
                          [(iv) Categorization and tiering.--
                        The joint regulations prescribed under 
                        clause (i) shall, as appropriate, 
                        differentiate among financial companies 
                        by taking into consideration their 
                        size, risk, complexity, leverage, 
                        frequency and dollar amount of 
                        qualified financial contracts, 
                        interconnectedness to the financial 
                        system, and any other factors deemed 
                        appropriate.
          [(9) Transfer of qualified financial contracts.--
                  [(A) In general.--In making any transfer of 
                assets or liabilities of a covered financial 
                company in default, which includes any 
                qualified financial contract, the Corporation 
                as receiver for such covered financial company 
                shall either--
                          [(i) transfer to one financial 
                        institution, other than a financial 
                        institution for which a conservator, 
                        receiver, trustee in bankruptcy, or 
                        other legal custodian has been 
                        appointed or which is otherwise the 
                        subject of a bankruptcy or insolvency 
                        proceeding--
                                  [(I) all qualified financial 
                                contracts between any person or 
                                any affiliate of such person 
                                and the covered financial 
                                company in default;
                                  [(II) all claims of such 
                                person or any affiliate of such 
                                person against such covered 
                                financial company under any 
                                such contract (other than any 
                                claim which, under the terms of 
                                any such contract, is 
                                subordinated to the claims of 
                                general unsecured creditors of 
                                such company);
                                  [(III) all claims of such 
                                covered financial company 
                                against such person or any 
                                affiliate of such person under 
                                any such contract; and
                                  [(IV) all property securing 
                                or any other credit enhancement 
                                for any contract described in 
                                subclause (I) or any claim 
                                described in subclause (II) or 
                                (III) under any such contract; 
                                or
                          [(ii) transfer none of the qualified 
                        financial contracts, claims, property 
                        or other credit enhancement referred to 
                        in clause (i) (with respect to such 
                        person and any affiliate of such 
                        person).
                  [(B) Transfer to foreign bank, financial 
                institution, or branch or agency thereof.--In 
                transferring any qualified financial contracts 
                and related claims and property under 
                subparagraph (A)(i), the Corporation as 
                receiver for the covered financial company 
                shall not make such transfer to a foreign bank, 
                financial institution organized under the laws 
                of a foreign country, or a branch or agency of 
                a foreign bank or financial institution unless, 
                under the law applicable to such bank, 
                financial institution, branch or agency, to the 
                qualified financial contracts, and to any 
                netting contract, any security agreement or 
                arrangement or other credit enhancement related 
                to one or more qualified financial contracts, 
                the contractual rights of the parties to such 
                qualified financial contracts, netting 
                contracts, security agreements or arrangements, 
                or other credit enhancements are enforceable 
                substantially to the same extent as permitted 
                under this section.
                  [(C) Transfer of contracts subject to the 
                rules of a clearing organization.--In the event 
                that the Corporation as receiver for a 
                financial institution transfers any qualified 
                financial contract and related claims, 
                property, or credit enhancement pursuant to 
                subparagraph (A)(i) and such contract is 
                cleared by or subject to the rules of a 
                clearing organization, the clearing 
                organization shall not be required to accept 
                the transferee as a member by virtue of the 
                transfer.
                  [(D) Definitions.--For purposes of this 
                paragraph--
                          [(i) the term ``financial 
                        institution'' means a broker or dealer, 
                        a depository institution, a futures 
                        commission merchant, a bridge financial 
                        company, or any other institution 
                        determined by the Corporation, by 
                        regulation, to be a financial 
                        institution; and
                          [(ii) the term ``clearing 
                        organization'' has the same meaning as 
                        in section 402 of the Federal Deposit 
                        Insurance Corporation Improvement Act 
                        of 1991.
          [(10) Notification of transfer.--
                  [(A) In general.--
                          [(i) Notice.--The Corporation shall 
                        provide notice in accordance with 
                        clause (ii), if--
                                  [(I) the Corporation as 
                                receiver for a covered 
                                financial company in default or 
                                in danger of default transfers 
                                any assets or liabilities of 
                                the covered financial company; 
                                and
                                  [(II) the transfer includes 
                                any qualified financial 
                                contract.
                          [(ii) Timing.--The Corporation as 
                        receiver for a covered financial 
                        company shall notify any person who is 
                        a party to any contract described in 
                        clause (i) of such transfer not later 
                        than 5:00 p.m. (eastern time) on the 
                        business day following the date of the 
                        appointment of the Corporation as 
                        receiver.
                  [(B) Certain rights not enforceable.--
                          [(i) Receivership.--A person who is a 
                        party to a qualified financial contract 
                        with a covered financial company may 
                        not exercise any right that such person 
                        has to terminate, liquidate, or net 
                        such contract under paragraph (8)(A) 
                        solely by reason of or incidental to 
                        the appointment under this section of 
                        the Corporation as receiver for the 
                        covered financial company (or the 
                        insolvency or financial condition of 
                        the covered financial company for which 
                        the Corporation has been appointed as 
                        receiver)--
                                  [(I) until 5:00 p.m. (eastern 
                                time) on the business day 
                                following the date of the 
                                appointment; or
                                  [(II) after the person has 
                                received notice that the 
                                contract has been transferred 
                                pursuant to paragraph (9)(A).
                          [(ii) Notice.--For purposes of this 
                        paragraph, the Corporation as receiver 
                        for a covered financial company shall 
                        be deemed to have notified a person who 
                        is a party to a qualified financial 
                        contract with such covered financial 
                        company, if the Corporation has taken 
                        steps reasonably calculated to provide 
                        notice to such person by the time 
                        specified in subparagraph (A).
                  [(C) Treatment of bridge financial company.--
                For purposes of paragraph (9), a bridge 
                financial company shall not be considered to be 
                a financial institution for which a 
                conservator, receiver, trustee in bankruptcy, 
                or other legal custodian has been appointed, or 
                which is otherwise the subject of a bankruptcy 
                or insolvency proceeding.
                  [(D) Business day defined.--For purposes of 
                this paragraph, the term ``business day'' means 
                any day other than any Saturday, Sunday, or any 
                day on which either the New York Stock Exchange 
                or the Federal Reserve Bank of New York is 
                closed.
          [(11) Disaffirmance or repudiation of qualified 
        financial contracts.--In exercising the rights of 
        disaffirmance or repudiation of the Corporation as 
        receiver with respect to any qualified financial 
        contract to which a covered financial company is a 
        party, the Corporation shall either--
                  [(A) disaffirm or repudiate all qualified 
                financial contracts between--
                          [(i) any person or any affiliate of 
                        such person; and
                          [(ii) the covered financial company 
                        in default; or
                  [(B) disaffirm or repudiate none of the 
                qualified financial contracts referred to in 
                subparagraph (A) (with respect to such person 
                or any affiliate of such person).
          [(12) Certain security and customer interests not 
        avoidable.--No provision of this subsection shall be 
        construed as permitting the avoidance of any--
                  [(A) legally enforceable or perfected 
                security interest in any of the assets of any 
                covered financial company, except in accordance 
                with subsection (a)(11); or
                  [(B) legally enforceable interest in customer 
                property, security entitlements in respect of 
                assets or property held by the covered 
                financial company for any security entitlement 
                holder.
          [(13) Authority to enforce contracts.--
                  [(A) In general.--The Corporation, as 
                receiver for a covered financial company, may 
                enforce any contract, other than a liability 
                insurance contract of a director or officer, a 
                financial institution bond entered into by the 
                covered financial company, notwithstanding any 
                provision of the contract providing for 
                termination, default, acceleration, or exercise 
                of rights upon, or solely by reason of, 
                insolvency, the appointment of or the exercise 
                of rights or powers by the Corporation as 
                receiver, the filing of the petition pursuant 
                to section 202(a)(1), or the issuance of the 
                recommendations or determination, or any 
                actions or events occurring in connection 
                therewith or as a result thereof, pursuant to 
                section 203.
                  [(B) Certain rights not affected.--No 
                provision of this paragraph may be construed as 
                impairing or affecting any right of the 
                Corporation as receiver to enforce or recover 
                under a liability insurance contract of a 
                director or officer or financial institution 
                bond under other applicable law.
                  [(C) Consent requirement and ipso facto 
                clauses.--
                          [(i) In general.--Except as otherwise 
                        provided by this section, no person may 
                        exercise any right or power to 
                        terminate, accelerate, or declare a 
                        default under any contract to which the 
                        covered financial company is a party 
                        (and no provision in any such contract 
                        providing for such default, 
                        termination, or acceleration shall be 
                        enforceable), or to obtain possession 
                        of or exercise control over any 
                        property of the covered financial 
                        company or affect any contractual 
                        rights of the covered financial 
                        company, without the consent of the 
                        Corporation as receiver for the covered 
                        financial company during the 90 day 
                        period beginning from the appointment 
                        of the Corporation as receiver.
                          [(ii) Exceptions.--No provision of 
                        this subparagraph shall apply to a 
                        director or officer liability insurance 
                        contract or a financial institution 
                        bond, to the rights of parties to 
                        certain qualified financial contracts 
                        pursuant to paragraph (8), or to the 
                        rights of parties to netting contracts 
                        pursuant to subtitle A of title IV of 
                        the Federal Deposit Insurance 
                        Corporation Improvement Act of 1991 (12 
                        U.S.C. 4401 et seq.), or shall be 
                        construed as permitting the Corporation 
                        as receiver to fail to comply with 
                        otherwise enforceable provisions of 
                        such contract.
                  [(D) Contracts to extend credit.--
                Notwithstanding any other provision in this 
                title, if the Corporation as receiver enforces 
                any contract to extend credit to the covered 
                financial company or bridge financial company, 
                any valid and enforceable obligation to repay 
                such debt shall be paid by the Corporation as 
                receiver, as an administrative expense of the 
                receivership.
          [(14) Exception for federal reserve banks and 
        corporation security interest.--No provision of this 
        subsection shall apply with respect to--
                  [(A) any extension of credit from any Federal 
                reserve bank or the Corporation to any covered 
                financial company; or
                  [(B) any security interest in the assets of 
                the covered financial company securing any such 
                extension of credit.
          [(15) Savings clause.--The meanings of terms used in 
        this subsection are applicable for purposes of this 
        subsection only, and shall not be construed or applied 
        so as to challenge or affect the characterization, 
        definition, or treatment of any similar terms under any 
        other statute, regulation, or rule, including the 
        Gramm-Leach-Bliley Act, the Legal Certainty for Bank 
        Products Act of 2000, the securities laws (as that term 
        is defined in section 3(a)(47) of the Securities 
        Exchange Act of 1934), and the Commodity Exchange Act.
          [(16) Enforcement of contracts guaranteed by the 
        covered financial company.--
                  [(A) In general.--The Corporation, as 
                receiver for a covered financial company or as 
                receiver for a subsidiary of a covered 
                financial company (including an insured 
                depository institution) shall have the power to 
                enforce contracts of subsidiaries or affiliates 
                of the covered financial company, the 
                obligations under which are guaranteed or 
                otherwise supported by or linked to the covered 
                financial company, notwithstanding any 
                contractual right to cause the termination, 
                liquidation, or acceleration of such contracts 
                based solely on the insolvency, financial 
                condition, or receivership of the covered 
                financial company, if--
                          [(i) such guaranty or other support 
                        and all related assets and liabilities 
                        are transferred to and assumed by a 
                        bridge financial company or a third 
                        party (other than a third party for 
                        which a conservator, receiver, trustee 
                        in bankruptcy, or other legal custodian 
                        has been appointed, or which is 
                        otherwise the subject of a bankruptcy 
                        or insolvency proceeding) within the 
                        same period of time as the Corporation 
                        is entitled to transfer the qualified 
                        financial contracts of such covered 
                        financial company; or
                          [(ii) the Corporation, as receiver, 
                        otherwise provides adequate protection 
                        with respect to such obligations.
                  [(B) Rule of construction.--For purposes of 
                this paragraph, a bridge financial company 
                shall not be considered to be a third party for 
                which a conservator, receiver, trustee in 
                bankruptcy, or other legal custodian has been 
                appointed, or which is otherwise the subject of 
                a bankruptcy or insolvency proceeding.
  [(d) Valuation of Claims in Default.--
          [(1) In general.--Notwithstanding any other provision 
        of Federal law or the law of any State, and regardless 
        of the method utilized by the Corporation for a covered 
        financial company, including transactions authorized 
        under subsection (h), this subsection shall govern the 
        rights of the creditors of any such covered financial 
        company.
          [(2) Maximum liability.--The maximum liability of the 
        Corporation, acting as receiver for a covered financial 
        company or in any other capacity, to any person having 
        a claim against the Corporation as receiver or the 
        covered financial company for which the Corporation is 
        appointed shall equal the amount that such claimant 
        would have received if--
                  [(A) the Corporation had not been appointed 
                receiver with respect to the covered financial 
                company; and
                  [(B) the covered financial company had been 
                liquidated under chapter 7 of the Bankruptcy 
                Code, or any similar provision of State 
                insolvency law applicable to the covered 
                financial company.
          [(3) Special provision for orderly liquidation by 
        sipc.--The maximum liability of the Corporation, acting 
        as receiver or in its corporate capacity for any 
        covered broker or dealer to any customer of such 
        covered broker or dealer, with respect to customer 
        property of such customer, shall be--
                  [(A) equal to the amount that such customer 
                would have received with respect to such 
                customer property in a case initiated by SIPC 
                under the Securities Investor Protection Act of 
                1970 (15 U.S.C. 78aaa et seq.); and
                  [(B) determined as of the close of business 
                on the date on which the Corporation is 
                appointed as receiver.
          [(4) Additional payments authorized.--
                  [(A) In general.--Subject to subsection 
                (o)(1)(D)(i), the Corporation, with the 
                approval of the Secretary, may make additional 
                payments or credit additional amounts to or 
                with respect to or for the account of any 
                claimant or category of claimants of the 
                covered financial company, if the Corporation 
                determines that such payments or credits are 
                necessary or appropriate to minimize losses to 
                the Corporation as receiver from the orderly 
                liquidation of the covered financial company 
                under this section.
                  [(B) Limitations.--
                          [(i) Prohibition.--The Corporation 
                        shall not make any payments or credit 
                        amounts to any claimant or category of 
                        claimants that would result in any 
                        claimant receiving more than the face 
                        value amount of any claim that is 
                        proven to the satisfaction of the 
                        Corporation.
                          [(ii) No obligation.--Notwithstanding 
                        any other provision of Federal or State 
                        law, or the Constitution of any State, 
                        the Corporation shall not be obligated, 
                        as a result of having made any payment 
                        under subparagraph (A) or credited any 
                        amount described in subparagraph (A) to 
                        or with respect to, or for the account, 
                        of any claimant or category of 
                        claimants, to make payments to any 
                        other claimant or category of 
                        claimants.
                  [(C) Manner of payment.--The Corporation may 
                make payments or credit amounts under 
                subparagraph (A) directly to the claimants or 
                may make such payments or credit such amounts 
                to a company other than a covered financial 
                company or a bridge financial company 
                established with respect thereto in order to 
                induce such other company to accept liability 
                for such claims.
  [(e) Limitation on Court Action.--Except as provided in this 
title, no court may take any action to restrain or affect the 
exercise of powers or functions of the receiver hereunder, and 
any remedy against the Corporation or receiver shall be limited 
to money damages determined in accordance with this title.
  [(f) Liability of Directors and Officers.--
          [(1) In general.--A director or officer of a covered 
        financial company may be held personally liable for 
        monetary damages in any civil action described in 
        paragraph (2) by, on behalf of, or at the request or 
        direction of the Corporation, which action is 
        prosecuted wholly or partially for the benefit of the 
        Corporation--
                  [(A) acting as receiver for such covered 
                financial company;
                  [(B) acting based upon a suit, claim, or 
                cause of action purchased from, assigned by, or 
                otherwise conveyed by the Corporation as 
                receiver; or
                  [(C) acting based upon a suit, claim, or 
                cause of action purchased from, assigned by, or 
                otherwise conveyed in whole or in part by a 
                covered financial company or its affiliate in 
                connection with assistance provided under this 
                title.
          [(2) Actions covered.--Paragraph (1) shall apply with 
        respect to actions for gross negligence, including any 
        similar conduct or conduct that demonstrates a greater 
        disregard of a duty of care (than gross negligence) 
        including intentional tortious conduct, as such terms 
        are defined and determined under applicable State law.
          [(3) Savings clause.--Nothing in this subsection 
        shall impair or affect any right of the Corporation 
        under other applicable law.
  [(g) Damages.--In any proceeding related to any claim against 
a director, officer, employee, agent, attorney, accountant, or 
appraiser of a covered financial company, or any other party 
employed by or providing services to a covered financial 
company, recoverable damages determined to result from the 
improvident or otherwise improper use or investment of any 
assets of the covered financial company shall include principal 
losses and appropriate interest.
  [(h) Bridge Financial Companies.--
          [(1) Organization.--
                  [(A) Purpose.--The Corporation, as receiver 
                for one or more covered financial companies or 
                in anticipation of being appointed receiver for 
                one or more covered financial companies, may 
                organize one or more bridge financial companies 
                in accordance with this subsection.
                  [(B) Authorities.--Upon the creation of a 
                bridge financial company under subparagraph (A) 
                with respect to a covered financial company, 
                such bridge financial company may--
                          [(i) assume such liabilities 
                        (including liabilities associated with 
                        any trust or custody business, but 
                        excluding any liabilities that count as 
                        regulatory capital) of such covered 
                        financial company as the Corporation 
                        may, in its discretion, determine to be 
                        appropriate;
                          [(ii) purchase such assets (including 
                        assets associated with any trust or 
                        custody business) of such covered 
                        financial company as the Corporation 
                        may, in its discretion, determine to be 
                        appropriate; and
                          [(iii) perform any other temporary 
                        function which the Corporation may, in 
                        its discretion, prescribe in accordance 
                        with this section.
          [(2) Charter and establishment.--
                  [(A) Establishment.--Except as provided in 
                subparagraph (H), where the covered financial 
                company is a covered broker or dealer, the 
                Corporation, as receiver for a covered 
                financial company, may grant a Federal charter 
                to and approve articles of association for one 
                or more bridge financial company or companies, 
                with respect to such covered financial company 
                which shall, by operation of law and 
                immediately upon issuance of its charter and 
                approval of its articles of association, be 
                established and operate in accordance with, and 
                subject to, such charter, articles, and this 
                section.
                  [(B) Management.--Upon its establishment, a 
                bridge financial company shall be under the 
                management of a board of directors appointed by 
                the Corporation.
                  [(C) Articles of association.--The articles 
                of association and organization certificate of 
                a bridge financial company shall have such 
                terms as the Corporation may provide, and shall 
                be executed by such representatives as the 
                Corporation may designate.
                  [(D) Terms of charter; rights and 
                privileges.--Subject to and in accordance with 
                the provisions of this subsection, the 
                Corporation shall--
                          [(i) establish the terms of the 
                        charter of a bridge financial company 
                        and the rights, powers, authorities, 
                        and privileges of a bridge financial 
                        company granted by the charter or as an 
                        incident thereto; and
                          [(ii) provide for, and establish the 
                        terms and conditions governing, the 
                        management (including the bylaws and 
                        the number of directors of the board of 
                        directors) and operations of the bridge 
                        financial company.
                  [(E) Transfer of rights and privileges of 
                covered financial company.--
                          [(i) In general.--Notwithstanding any 
                        other provision of Federal or State 
                        law, the Corporation may provide for a 
                        bridge financial company to succeed to 
                        and assume any rights, powers, 
                        authorities, or privileges of the 
                        covered financial company with respect 
                        to which the bridge financial company 
                        was established and, upon such 
                        determination by the Corporation, the 
                        bridge financial company shall 
                        immediately and by operation of law 
                        succeed to and assume such rights, 
                        powers, authorities, and privileges.
                          [(ii) Effective without approval.--
                        Any succession to or assumption by a 
                        bridge financial company of rights, 
                        powers, authorities, or privileges of a 
                        covered financial company under clause 
                        (i) or otherwise shall be effective 
                        without any further approval under 
                        Federal or State law, assignment, or 
                        consent with respect thereto.
                  [(F) Corporate governance and election and 
                designation of body of law.--To the extent 
                permitted by the Corporation and consistent 
                with this section and any rules, regulations, 
                or directives issued by the Corporation under 
                this section, a bridge financial company may 
                elect to follow the corporate governance 
                practices and procedures that are applicable to 
                a corporation incorporated under the general 
                corporation law of the State of Delaware, or 
                the State of incorporation or organization of 
                the covered financial company with respect to 
                which the bridge financial company was 
                established, as such law may be amended from 
                time to time.
                  [(G) Capital.--
                          [(i) Capital not required.--
                        Notwithstanding any other provision of 
                        Federal or State law, a bridge 
                        financial company may, if permitted by 
                        the Corporation, operate without any 
                        capital or surplus, or with such 
                        capital or surplus as the Corporation 
                        may in its discretion determine to be 
                        appropriate.
                          [(ii) No contribution by the 
                        corporation required.--The Corporation 
                        is not required to pay capital into a 
                        bridge financial company or to issue 
                        any capital stock on behalf of a bridge 
                        financial company established under 
                        this subsection.
                          [(iii) Authority.--If the Corporation 
                        determines that such action is 
                        advisable, the Corporation may cause 
                        capital stock or other securities of a 
                        bridge financial company established 
                        with respect to a covered financial 
                        company to be issued and offered for 
                        sale in such amounts and on such terms 
                        and conditions as the Corporation may, 
                        in its discretion, determine.
                          [(iv) Operating funds in lieu of 
                        capital and implementation plan.--Upon 
                        the organization of a bridge financial 
                        company, and thereafter as the 
                        Corporation may, in its discretion, 
                        determine to be necessary or advisable, 
                        the Corporation may make available to 
                        the bridge financial company, subject 
                        to the plan described in subsection 
                        (n)(9), funds for the operation of the 
                        bridge financial company in lieu of 
                        capital.
                  [(H) Bridge brokers or dealers.--
                          [(i) In general.--The Corporation, as 
                        receiver for a covered broker or 
                        dealer, may approve articles of 
                        association for one or more bridge 
                        financial companies with respect to 
                        such covered broker or dealer, which 
                        bridge financial company or companies 
                        shall, by operation of law and 
                        immediately upon approval of its 
                        articles of association--
                                  [(I) be established and 
                                deemed registered with the 
                                Commission under the Securities 
                                Exchange Act of 1934 and a 
                                member of SIPC;
                                  [(II) operate in accordance 
                                with such articles and this 
                                section; and
                                  [(III) succeed to any and all 
                                registrations and memberships 
                                of the covered financial 
                                company with or in any self-
                                regulatory organizations.
                          [(ii) Other requirements.--Except as 
                        provided in clause (i), and 
                        notwithstanding any other provision of 
                        this section, the bridge financial 
                        company shall be subject to the Federal 
                        securities laws and all requirements 
                        with respect to being a member of a 
                        self-regulatory organization, unless 
                        exempted from any such requirements by 
                        the Commission, as is necessary or 
                        appropriate in the public interest or 
                        for the protection of investors.
                          [(iii) Treatment of customers.--
                        Except as otherwise provided by this 
                        title, any customer of the covered 
                        broker or dealer whose account is 
                        transferred to a bridge financial 
                        company shall have all the rights, 
                        privileges, and protections under 
                        section 205(f) and under the Securities 
                        Investor Protection Act of 1970 (15 
                        U.S.C. 78aaa et seq.), that such 
                        customer would have had if the account 
                        were not transferred from the covered 
                        financial company under this 
                        subparagraph.
                          [(iv) Operation of bridge brokers or 
                        dealers.--Notwithstanding any other 
                        provision of this title, the 
                        Corporation shall not operate any 
                        bridge financial company created by the 
                        Corporation under this title with 
                        respect to a covered broker or dealer 
                        in such a manner as to adversely affect 
                        the ability of customers to promptly 
                        access their customer property in 
                        accordance with applicable law.
          [(3) Interests in and assets and obligations of 
        covered financial company.--Notwithstanding paragraph 
        (1) or (2) or any other provision of law--
                  [(A) a bridge financial company shall assume, 
                acquire, or succeed to the assets or 
                liabilities of a covered financial company 
                (including the assets or liabilities associated 
                with any trust or custody business) only to the 
                extent that such assets or liabilities are 
                transferred by the Corporation to the bridge 
                financial company in accordance with, and 
                subject to the restrictions set forth in, 
                paragraph (1)(B); and
                  [(B) a bridge financial company shall not 
                assume, acquire, or succeed to any obligation 
                that a covered financial company for which the 
                Corporation has been appointed receiver may 
                have to any shareholder, member, general 
                partner, limited partner, or other person with 
                an interest in the equity of the covered 
                financial company that arises as a result of 
                the status of that person having an equity 
                claim in the covered financial company.
          [(4) Bridge financial company treated as being in 
        default for certain purposes.--A bridge financial 
        company shall be treated as a covered financial company 
        in default at such times and for such purposes as the 
        Corporation may, in its discretion, determine.
          [(5) Transfer of assets and liabilities.--
                  [(A) Authority of corporation.--The 
                Corporation, as receiver for a covered 
                financial company, may transfer any assets and 
                liabilities of a covered financial company 
                (including any assets or liabilities associated 
                with any trust or custody business) to one or 
                more bridge financial companies, in accordance 
                with and subject to the restrictions of 
                paragraph (1).
                  [(B) Subsequent transfers.--At any time after 
                the establishment of a bridge financial company 
                with respect to a covered financial company, 
                the Corporation, as receiver, may transfer any 
                assets and liabilities of such covered 
                financial company as the Corporation may, in 
                its discretion, determine to be appropriate in 
                accordance with and subject to the restrictions 
                of paragraph (1).
                  [(C) Treatment of trust or custody 
                business.--For purposes of this paragraph, the 
                trust or custody business, including fiduciary 
                appointments, held by any covered financial 
                company is included among its assets and 
                liabilities.
                  [(D) Effective without approval.--The 
                transfer of any assets or liabilities, 
                including those associated with any trust or 
                custody business of a covered financial 
                company, to a bridge financial company shall be 
                effective without any further approval under 
                Federal or State law, assignment, or consent 
                with respect thereto.
                  [(E) Equitable treatment of similarly 
                situated creditors.--The Corporation shall 
                treat all creditors of a covered financial 
                company that are similarly situated under 
                subsection (b)(1), in a similar manner in 
                exercising the authority of the Corporation 
                under this subsection to transfer any assets or 
                liabilities of the covered financial company to 
                one or more bridge financial companies 
                established with respect to such covered 
                financial company, except that the Corporation 
                may take any action (including making payments, 
                subject to subsection (o)(1)(D)(i)) that does 
                not comply with this subparagraph, if--
                          [(i) the Corporation determines that 
                        such action is necessary--
                                  [(I) to maximize the value of 
                                the assets of the covered 
                                financial company;
                                  [(II) to maximize the present 
                                value return from the sale or 
                                other disposition of the assets 
                                of the covered financial 
                                company; or
                                  [(III) to minimize the amount 
                                of any loss realized upon the 
                                sale or other disposition of 
                                the assets of the covered 
                                financial company; and
                          [(ii) all creditors that are 
                        similarly situated under subsection 
                        (b)(1) receive not less than the amount 
                        provided under paragraphs (2) and (3) 
                        of subsection (d).
                  [(F) Limitation on transfer of liabilities.--
                Notwithstanding any other provision of law, the 
                aggregate amount of liabilities of a covered 
                financial company that are transferred to, or 
                assumed by, a bridge financial company from a 
                covered financial company may not exceed the 
                aggregate amount of the assets of the covered 
                financial company that are transferred to, or 
                purchased by, the bridge financial company from 
                the covered financial company.
          [(6) Stay of judicial action.--Any judicial action to 
        which a bridge financial company becomes a party by 
        virtue of its acquisition of any assets or assumption 
        of any liabilities of a covered financial company shall 
        be stayed from further proceedings for a period of not 
        longer than 45 days (or such longer period as may be 
        agreed to upon the consent of all parties) at the 
        request of the bridge financial company.
          [(7) Agreements against interest of the bridge 
        financial company.--No agreement that tends to diminish 
        or defeat the interest of the bridge financial company 
        in any asset of a covered financial company acquired by 
        the bridge financial company shall be valid against the 
        bridge financial company, unless such agreement--
                  [(A) is in writing;
                  [(B) was executed by an authorized officer or 
                representative of the covered financial company 
                or confirmed in the ordinary course of business 
                by the covered financial company; and
                  [(C) has been on the official record of the 
                company, since the time of its execution, or 
                with which, the party claiming under the 
                agreement provides documentation of such 
                agreement and its authorized execution or 
                confirmation by the covered financial company 
                that is acceptable to the receiver.
          [(8) No federal status.--
                  [(A) Agency status.--A bridge financial 
                company is not an agency, establishment, or 
                instrumentality of the United States.
                  [(B) Employee status.--Representatives for 
                purposes of paragraph (1)(B), directors, 
                officers, employees, or agents of a bridge 
                financial company are not, solely by virtue of 
                service in any such capacity, officers or 
                employees of the United States. Any employee of 
                the Corporation or of any Federal 
                instrumentality who serves at the request of 
                the Corporation as a representative for 
                purposes of paragraph (1)(B), director, 
                officer, employee, or agent of a bridge 
                financial company shall not--
                          [(i) solely by virtue of service in 
                        any such capacity lose any existing 
                        status as an officer or employee of the 
                        United States for purposes of title 5, 
                        United States Code, or any other 
                        provision of law; or
                          [(ii) receive any salary or benefits 
                        for service in any such capacity with 
                        respect to a bridge financial company 
                        in addition to such salary or benefits 
                        as are obtained through employment with 
                        the Corporation or such Federal 
                        instrumentality.
          [(9) Funding authorized.--The Corporation may, 
        subject to the plan described in subsection (n)(9), 
        provide funding to facilitate any transaction described 
        in subparagraph (A), (B), (C), or (D) of paragraph (13) 
        with respect to any bridge financial company, or 
        facilitate the acquisition by a bridge financial 
        company of any assets, or the assumption of any 
        liabilities, of a covered financial company for which 
        the Corporation has been appointed receiver.
          [(10) Exempt tax status.--Notwithstanding any other 
        provision of Federal or State law, a bridge financial 
        company, its franchise, property, and income shall be 
        exempt from all taxation now or hereafter imposed by 
        the United States, by any territory, dependency, or 
        possession thereof, or by any State, county, 
        municipality, or local taxing authority.
          [(11) Federal agency approval; antitrust review.--If 
        a transaction involving the merger or sale of a bridge 
        financial company requires approval by a Federal 
        agency, the transaction may not be consummated before 
        the 5th calendar day after the date of approval by the 
        Federal agency responsible for such approval with 
        respect thereto. If, in connection with any such 
        approval a report on competitive factors from the 
        Attorney General is required, the Federal agency 
        responsible for such approval shall promptly notify the 
        Attorney General of the proposed transaction and the 
        Attorney General shall provide the required report 
        within 10 days of the request. If a notification is 
        required under section 7A of the Clayton Act with 
        respect to such transaction, the required waiting 
        period shall end on the 15th day after the date on 
        which the Attorney General and the Federal Trade 
        Commission receive such notification, unless the 
        waiting period is terminated earlier under section 
        7A(b)(2) of the Clayton Act, or extended under section 
        7A(e)(2) of that Act.
          [(12) Duration of bridge financial company.--Subject 
        to paragraphs (13) and (14), the status of a bridge 
        financial company as such shall terminate at the end of 
        the 2-year period following the date on which it was 
        granted a charter. The Corporation may, in its 
        discretion, extend the status of the bridge financial 
        company as such for no more than 3 additional 1-year 
        periods.
          [(13) Termination of bridge financial company 
        status.--The status of any bridge financial company as 
        such shall terminate upon the earliest of--
                  [(A) the date of the merger or consolidation 
                of the bridge financial company with a company 
                that is not a bridge financial company;
                  [(B) at the election of the Corporation, the 
                sale of a majority of the capital stock of the 
                bridge financial company to a company other 
                than the Corporation and other than another 
                bridge financial company;
                  [(C) the sale of 80 percent, or more, of the 
                capital stock of the bridge financial company 
                to a person other than the Corporation and 
                other than another bridge financial company;
                  [(D) at the election of the Corporation, 
                either the assumption of all or substantially 
                all of the liabilities of the bridge financial 
                company by a company that is not a bridge 
                financial company, or the acquisition of all or 
                substantially all of the assets of the bridge 
                financial company by a company that is not a 
                bridge financial company, or other entity as 
                permitted under applicable law; and
                  [(E) the expiration of the period provided in 
                paragraph (12), or the earlier dissolution of 
                the bridge financial company, as provided in 
                paragraph (15).
          [(14) Effect of termination events.--
                  [(A) Merger or consolidation.--A merger or 
                consolidation, described in paragraph (13)(A) 
                shall be conducted in accordance with, and 
                shall have the effect provided in, the 
                provisions of applicable law. For the purpose 
                of effecting such a merger or consolidation, 
                the bridge financial company shall be treated 
                as a corporation organized under the laws of 
                the State of Delaware (unless the law of 
                another State has been selected by the bridge 
                financial company in accordance with paragraph 
                (2)(F)), and the Corporation shall be treated 
                as the sole shareholder thereof, 
                notwithstanding any other provision of State or 
                Federal law.
                  [(B) Charter conversion.--Following the sale 
                of a majority of the capital stock of the 
                bridge financial company, as provided in 
                paragraph (13)(B), the Corporation may amend 
                the charter of the bridge financial company to 
                reflect the termination of the status of the 
                bridge financial company as such, whereupon the 
                company shall have all of the rights, powers, 
                and privileges under its constituent documents 
                and applicable Federal or State law. In 
                connection therewith, the Corporation may take 
                such steps as may be necessary or convenient to 
                reincorporate the bridge financial company 
                under the laws of a State and, notwithstanding 
                any provisions of Federal or State law, such 
                State-chartered corporation shall be deemed to 
                succeed by operation of law to such rights, 
                titles, powers, and interests of the bridge 
                financial company as the Corporation may 
                provide, with the same effect as if the bridge 
                financial company had merged with the State-
                chartered corporation under provisions of the 
                corporate laws of such State.
                  [(C) Sale of stock.--Following the sale of 80 
                percent or more of the capital stock of a 
                bridge financial company, as provided in 
                paragraph (13)(C), the company shall have all 
                of the rights, powers, and privileges under its 
                constituent documents and applicable Federal or 
                State law. In connection therewith, the 
                Corporation may take such steps as may be 
                necessary or convenient to reincorporate the 
                bridge financial company under the laws of a 
                State and, notwithstanding any provisions of 
                Federal or State law, the State-chartered 
                corporation shall be deemed to succeed by 
                operation of law to such rights, titles, powers 
                and interests of the bridge financial company 
                as the Corporation may provide, with the same 
                effect as if the bridge financial company had 
                merged with the State-chartered corporation 
                under provisions of the corporate laws of such 
                State.
                  [(D) Assumption of liabilities and sale of 
                assets.--Following the assumption of all or 
                substantially all of the liabilities of the 
                bridge financial company, or the sale of all or 
                substantially all of the assets of the bridge 
                financial company, as provided in paragraph 
                (13)(D), at the election of the Corporation, 
                the bridge financial company may retain its 
                status as such for the period provided in 
                paragraph (12) or may be dissolved at the 
                election of the Corporation.
                  [(E) Amendments to charter.--Following the 
                consummation of a transaction described in 
                subparagraph (A), (B), (C), or (D) of paragraph 
                (13), the charter of the resulting company 
                shall be amended to reflect the termination of 
                bridge financial company status, if 
                appropriate.
          [(15) Dissolution of bridge financial company.--
                  [(A) In general.--Notwithstanding any other 
                provision of Federal or State law, if the 
                status of a bridge financial company as such 
                has not previously been terminated by the 
                occurrence of an event specified in 
                subparagraph (A), (B), (C), or (D) of paragraph 
                (13)--
                          [(i) the Corporation may, in its 
                        discretion, dissolve the bridge 
                        financial company in accordance with 
                        this paragraph at any time; and
                          [(ii) the Corporation shall promptly 
                        commence dissolution proceedings in 
                        accordance with this paragraph upon the 
                        expiration of the 2-year period 
                        following the date on which the bridge 
                        financial company was chartered, or any 
                        extension thereof, as provided in 
                        paragraph (12).
                  [(B) Procedures.--The Corporation shall 
                remain the receiver for a bridge financial 
                company for the purpose of dissolving the 
                bridge financial company. The Corporation as 
                receiver for a bridge financial company shall 
                wind up the affairs of the bridge financial 
                company in conformity with the provisions of 
                law relating to the liquidation of covered 
                financial companies under this title. With 
                respect to any such bridge financial company, 
                the Corporation as receiver shall have all the 
                rights, powers, and privileges and shall 
                perform the duties related to the exercise of 
                such rights, powers, or privileges granted by 
                law to the Corporation as receiver for a 
                covered financial company under this title and, 
                notwithstanding any other provision of law, in 
                the exercise of such rights, powers, and 
                privileges, the Corporation shall not be 
                subject to the direction or supervision of any 
                State agency or other Federal agency.
          [(16) Authority to obtain credit.--
                  [(A) In general.--A bridge financial company 
                may obtain unsecured credit and issue unsecured 
                debt.
                  [(B) Inability to obtain credit.--If a bridge 
                financial company is unable to obtain unsecured 
                credit or issue unsecured debt, the Corporation 
                may authorize the obtaining of credit or the 
                issuance of debt by the bridge financial 
                company--
                          [(i) with priority over any or all of 
                        the obligations of the bridge financial 
                        company;
                          [(ii) secured by a lien on property 
                        of the bridge financial company that is 
                        not otherwise subject to a lien; or
                          [(iii) secured by a junior lien on 
                        property of the bridge financial 
                        company that is subject to a lien.
                  [(C) Limitations.--
                          [(i) In general.--The Corporation, 
                        after notice and a hearing, may 
                        authorize the obtaining of credit or 
                        the issuance of debt by a bridge 
                        financial company that is secured by a 
                        senior or equal lien on property of the 
                        bridge financial company that is 
                        subject to a lien, only if--
                                  [(I) the bridge financial 
                                company is unable to otherwise 
                                obtain such credit or issue 
                                such debt; and
                                  [(II) there is adequate 
                                protection of the interest of 
                                the holder of the lien on the 
                                property with respect to which 
                                such senior or equal lien is 
                                proposed to be granted.
                          [(ii) Hearing.--The hearing required 
                        pursuant to this subparagraph shall be 
                        before a court of the United States, 
                        which shall have jurisdiction to 
                        conduct such hearing and to authorize a 
                        bridge financial company to obtain 
                        secured credit under clause (i).
                  [(D) Burden of proof.--In any hearing under 
                this paragraph, the Corporation has the burden 
                of proof on the issue of adequate protection.
                  [(E) Qualified financial contracts.--No 
                credit or debt obtained or issued by a bridge 
                financial company may contain terms that impair 
                the rights of a counterparty to a qualified 
                financial contract upon a default by the bridge 
                financial company, other than the priority of 
                such counterparty's unsecured claim (after the 
                exercise of rights) relative to the priority of 
                the bridge financial company's obligations in 
                respect of such credit or debt, unless such 
                counterparty consents in writing to any such 
                impairment.
          [(17) Effect on debts and liens.--The reversal or 
        modification on appeal of an authorization under this 
        subsection to obtain credit or issue debt, or of a 
        grant under this section of a priority or a lien, does 
        not affect the validity of any debt so issued, or any 
        priority or lien so granted, to an entity that extended 
        such credit in good faith, whether or not such entity 
        knew of the pendency of the appeal, unless such 
        authorization and the issuance of such debt, or the 
        granting of such priority or lien, were stayed pending 
        appeal.
  [(i) Sharing Records.--If the Corporation has been appointed 
as receiver for a covered financial company, other Federal 
regulators shall make all records relating to the covered 
financial company available to the Corporation, which may be 
used by the Corporation in any manner that the Corporation 
determines to be appropriate.
  [(j) Expedited Procedures for Certain Claims.--
          [(1) Time for filing notice of appeal.--The notice of 
        appeal of any order, whether interlocutory or final, 
        entered in any case brought by the Corporation against 
        a director, officer, employee, agent, attorney, 
        accountant, or appraiser of the covered financial 
        company, or any other person employed by or providing 
        services to a covered financial company, shall be filed 
        not later than 30 days after the date of entry of the 
        order. The hearing of the appeal shall be held not 
        later than 120 days after the date of the notice of 
        appeal. The appeal shall be decided not later than 180 
        days after the date of the notice of appeal.
          [(2) Scheduling.--The court shall expedite the 
        consideration of any case brought by the Corporation 
        against a director, officer, employee, agent, attorney, 
        accountant, or appraiser of a covered financial company 
        or any other person employed by or providing services 
        to a covered financial company. As far as practicable, 
        the court shall give such case priority on its docket.
          [(3) Judicial discretion.--The court may modify the 
        schedule and limitations stated in paragraphs (1) and 
        (2) in a particular case, based on a specific finding 
        that the ends of justice that would be served by making 
        such a modification would outweigh the best interest of 
        the public in having the case resolved expeditiously.
  [(k) Foreign Investigations.--The Corporation, as receiver 
for any covered financial company, and for purposes of carrying 
out any power, authority, or duty with respect to a covered 
financial company--
          [(1) may request the assistance of any foreign 
        financial authority and provide assistance to any 
        foreign financial authority in accordance with section 
        8(v) of the Federal Deposit Insurance Act, as if the 
        covered financial company were an insured depository 
        institution, the Corporation were the appropriate 
        Federal banking agency for the company, and any foreign 
        financial authority were the foreign banking authority; 
        and
          [(2) may maintain an office to coordinate foreign 
        investigations or investigations on behalf of foreign 
        financial authorities.
  [(l) Prohibition on Entering Secrecy Agreements and 
Protective Orders.--The Corporation may not enter into any 
agreement or approve any protective order which prohibits the 
Corporation from disclosing the terms of any settlement of an 
administrative or other action for damages or restitution 
brought by the Corporation in its capacity as receiver for a 
covered financial company.
  [(m) Liquidation of Certain Covered Financial Companies or 
Bridge Financial Companies.--
          [(1) In general.--Except as specifically provided in 
        this section, and notwithstanding any other provision 
        of law, the Corporation, in connection with the 
        liquidation of any covered financial company or bridge 
        financial company with respect to which the Corporation 
        has been appointed as receiver, shall--
                  [(A) in the case of any covered financial 
                company or bridge financial company that is a 
                stockbroker, but is not a member of the 
                Securities Investor Protection Corporation, 
                apply the provisions of subchapter III of 
                chapter 7 of the Bankruptcy Code, in respect of 
                the distribution to any customer of all 
                customer name security and customer property 
                and member property, as if such covered 
                financial company or bridge financial company 
                were a debtor for purposes of such subchapter; 
                or
                  [(B) in the case of any covered financial 
                company or bridge financial company that is a 
                commodity broker, apply the provisions of 
                subchapter IV of chapter 7 the Bankruptcy Code, 
                in respect of the distribution to any customer 
                of all customer property and member property, 
                as if such covered financial company or bridge 
                financial company were a debtor for purposes of 
                such subchapter.
          [(2) Definitions.--For purposes of this subsection--
                  [(A) the terms ``customer'', ``customer name 
                security'', and ``customer property and member 
                property'' have the same meanings as in 
                sections 741 and 761 of title 11, United States 
                Code; and
                  [(B) the terms ``commodity broker'' and 
                ``stockbroker'' have the same meanings as in 
                section 101 of the Bankruptcy Code.
  [(n) Orderly Liquidation Fund.--
          [(1) Establishment.--There is established in the 
        Treasury of the United States a separate fund to be 
        known as the ``Orderly Liquidation Fund'', which shall 
        be available to the Corporation to carry out the 
        authorities contained in this title, for the cost of 
        actions authorized by this title, including the orderly 
        liquidation of covered financial companies, payment of 
        administrative expenses, the payment of principal and 
        interest by the Corporation on obligations issued under 
        paragraph (5), and the exercise of the authorities of 
        the Corporation under this title.
          [(2) Proceeds.--Amounts received by the Corporation, 
        including assessments received under subsection (o), 
        proceeds of obligations issued under paragraph (5), 
        interest and other earnings from investments, and 
        repayments to the Corporation by covered financial 
        companies, shall be deposited into the Fund.
          [(3) Management.--The Corporation shall manage the 
        Fund in accordance with this subsection and the 
        policies and procedures established under section 
        203(d).
          [(4) Investments.--At the request of the Corporation, 
        the Secretary may invest such portion of amounts held 
        in the Fund that are not, in the judgment of the 
        Corporation, required to meet the current needs of the 
        Corporation, in obligations of the United States having 
        suitable maturities, as determined by the Corporation. 
        The interest on and the proceeds from the sale or 
        redemption of such obligations shall be credited to the 
        Fund.
          [(5) Authority to issue obligations.--
                  [(A) Corporation authorized to issue 
                obligations.--Upon appointment by the Secretary 
                of the Corporation as receiver for a covered 
                financial company, the Corporation is 
                authorized to issue obligations to the 
                Secretary.
                  [(B) Secretary authorized to purchase 
                obligations.--The Secretary may, under such 
                terms and conditions as the Secretary may 
                require, purchase or agree to purchase any 
                obligations issued under subparagraph (A), and 
                for such purpose, the Secretary is authorized 
                to use as a public debt transaction the 
                proceeds of the sale of any securities issued 
                under chapter 31 of title 31, United States 
                Code, and the purposes for which securities may 
                be issued under chapter 31 of title 31, United 
                States Code, are extended to include such 
                purchases.
                  [(C) Interest rate.--Each purchase of 
                obligations by the Secretary under this 
                paragraph shall be upon such terms and 
                conditions as to yield a return at a rate 
                determined by the Secretary, taking into 
                consideration the current average yield on 
                outstanding marketable obligations of the 
                United States of comparable maturity, plus an 
                interest rate surcharge to be determined by the 
                Secretary, which shall be greater than the 
                difference between--
                          [(i) the current average rate on an 
                        index of corporate obligations of 
                        comparable maturity; and
                          [(ii) the current average rate on 
                        outstanding marketable obligations of 
                        the United States of comparable 
                        maturity.
                  [(D) Secretary authorized to sell 
                obligations.--The Secretary may sell, upon such 
                terms and conditions as the Secretary shall 
                determine, any of the obligations acquired 
                under this paragraph.
                  [(E) Public debt transactions.--All purchases 
                and sales by the Secretary of such obligations 
                under this paragraph shall be treated as public 
                debt transactions of the United States, and the 
                proceeds from the sale of any obligations 
                acquired by the Secretary under this paragraph 
                shall be deposited into the Treasury of the 
                United States as miscellaneous receipts.
          [(6) Maximum obligation limitation.--The Corporation 
        may not, in connection with the orderly liquidation of 
        a covered financial company, issue or incur any 
        obligation, if, after issuing or incurring the 
        obligation, the aggregate amount of such obligations 
        outstanding under this subsection for each covered 
        financial company would exceed--
                  [(A) an amount that is equal to 10 percent of 
                the total consolidated assets of the covered 
                financial company, based on the most recent 
                financial statement available, during the 30-
                day period immediately following the date of 
                appointment of the Corporation as receiver (or 
                a shorter time period if the Corporation has 
                calculated the amount described under 
                subparagraph (B)); and
                  [(B) the amount that is equal to 90 percent 
                of the fair value of the total consolidated 
                assets of each covered financial company that 
                are available for repayment, after the time 
                period described in subparagraph (A).
          [(7) Rulemaking.--The Corporation and the Secretary 
        shall jointly, in consultation with the Council, 
        prescribe regulations governing the calculation of the 
        maximum obligation limitation defined in this 
        paragraph.
          [(8) Rule of construction.--
                  [(A) In general.--Nothing in this section 
                shall be construed to affect the authority of 
                the Corporation under subsection (a) or (b) of 
                section 14 or section 15(c)(5) of the Federal 
                Deposit Insurance Act (12 U.S.C. 1824, 
                1825(c)(5)), the management of the Deposit 
                Insurance Fund by the Corporation, or the 
                resolution of insured depository institutions, 
                provided that--
                          [(i) the authorities of the 
                        Corporation contained in this title 
                        shall not be used to assist the Deposit 
                        Insurance Fund or to assist any 
                        financial company under applicable law 
                        other than this Act;
                          [(ii) the authorities of the 
                        Corporation relating to the Deposit 
                        Insurance Fund, or any other 
                        responsibilities of the Corporation 
                        under applicable law other than this 
                        title, shall not be used to assist a 
                        covered financial company pursuant to 
                        this title; and
                          [(iii) the Deposit Insurance Fund may 
                        not be used in any manner to otherwise 
                        circumvent the purposes of this title.
                  [(B) Valuation.--For purposes of determining 
                the amount of obligations under this 
                subsection--
                          [(i) the Corporation shall include as 
                        an obligation any contingent liability 
                        of the Corporation pursuant to this 
                        title; and
                          [(ii) the Corporation shall value any 
                        contingent liability at its expected 
                        cost to the Corporation.
          [(9) Orderly liquidation and repayment plans.--
                  [(A) Orderly liquidation plan.--Amounts in 
                the Fund shall be available to the Corporation 
                with regard to a covered financial company for 
                which the Corporation is appointed receiver 
                after the Corporation has developed an orderly 
                liquidation plan that is acceptable to the 
                Secretary with regard to such covered financial 
                company, including the provision and use of 
                funds, including taking any actions specified 
                under section 204(d) and subsection 
                (h)(2)(G)(iv) and (h)(9) of this section, and 
                payments to third parties. The orderly 
                liquidation plan shall take into account 
                actions to avoid or mitigate potential adverse 
                effects on low income, minority, or underserved 
                communities affected by the failure of the 
                covered financial company, and shall provide 
                for coordination with the primary financial 
                regulatory agencies, as appropriate, to ensure 
                that such actions are taken. The Corporation 
                may, at any time, amend any orderly liquidation 
                plan approved by the Secretary with the 
                concurrence of the Secretary.
                  [(B) Mandatory repayment plan.--
                          [(i) In general.--No amount 
                        authorized under paragraph (6)(B) may 
                        be provided by the Secretary to the 
                        Corporation under paragraph (5), unless 
                        an agreement is in effect between the 
                        Secretary and the Corporation that--
                                  [(I) provides a specific plan 
                                and schedule to achieve the 
                                repayment of the outstanding 
                                amount of any borrowing under 
                                paragraph (5); and
                                  [(II) demonstrates that 
                                income to the Corporation from 
                                the liquidated assets of the 
                                covered financial company and 
                                assessments under subsection 
                                (o) will be sufficient to 
                                amortize the outstanding 
                                balance within the period 
                                established in the repayment 
                                schedule and pay the interest 
                                accruing on such balance within 
                                the time provided in subsection 
                                (o)(1)(B).
                          [(ii) Consultation with and report to 
                        congress.--The Secretary and the 
                        Corporation shall--
                                  [(I) consult with the 
                                Committee on Banking, Housing, 
                                and Urban Affairs of the Senate 
                                and the Committee on Financial 
                                Services of the House of 
                                Representatives on the terms of 
                                any repayment schedule 
                                agreement; and
                                  [(II) submit a copy of the 
                                repayment schedule agreement to 
                                the Committees described in 
                                subclause (I) before the end of 
                                the 30-day period beginning on 
                                the date on which any amount is 
                                provided by the Secretary to 
                                the Corporation under paragraph 
                                (5).
          [(10) Implementation expenses.--
                  [(A) In general.--Reasonable implementation 
                expenses of the Corporation incurred after the 
                date of enactment of this Act shall be treated 
                as expenses of the Council.
                  [(B) Requests for reimbursement.--The 
                Corporation shall periodically submit a request 
                for reimbursement for implementation expenses 
                to the Chairperson of the Council, who shall 
                arrange for prompt reimbursement to the 
                Corporation of reasonable implementation 
                expenses.
                  [(C) Definition.--As used in this paragraph, 
                the term ``implementation expenses''--
                          [(i) means costs incurred by the 
                        Corporation beginning on the date of 
                        enactment of this Act, as part of its 
                        efforts to implement this title that do 
                        not relate to a particular covered 
                        financial company; and
                          [(ii) includes the costs incurred in 
                        connection with the development of 
                        policies, procedures, rules, and 
                        regulations and other planning 
                        activities of the Corporation 
                        consistent with carrying out this 
                        title.
  [(o) Assessments.--
          [(1) Risk-based assessments.--
                  [(A) Eligible financial companies defined.--
                For purposes of this subsection, the term 
                ``eligible financial company'' means any bank 
                holding company with total consolidated assets 
                equal to or greater than $50,000,000,000 and 
                any nonbank financial company supervised by the 
                Board of Governors.
                  [(B) Assessments.--The Corporation shall 
                charge one or more risk-based assessments in 
                accordance with the provisions of subparagraph 
                (D), if such assessments are necessary to pay 
                in full the obligations issued by the 
                Corporation to the Secretary under this title 
                within 60 months of the date of issuance of 
                such obligations.
                  [(C) Extensions authorized.--The Corporation 
                may, with the approval of the Secretary, extend 
                the time period under subparagraph (B), if the 
                Corporation determines that an extension is 
                necessary to avoid a serious adverse effect on 
                the financial system of the United States.
                  [(D) Application of assessments.--To meet the 
                requirements of subparagraph (B), the 
                Corporation shall--
                          [(i) impose assessments, as soon as 
                        practicable, on any claimant that 
                        received additional payments or amounts 
                        from the Corporation pursuant to 
                        subsection (b)(4), (d)(4), or 
                        (h)(5)(E), except for payments or 
                        amounts necessary to initiate and 
                        continue operations essential to 
                        implementation of the receivership or 
                        any bridge financial company, to 
                        recover on a cumulative basis, the 
                        entire difference between--
                                  [(I) the aggregate value the 
                                claimant received from the 
                                Corporation on a claim pursuant 
                                to this title (including 
                                pursuant to subsection (b)(4), 
                                (d)(4), and (h)(5)(E)), as of 
                                the date on which such value 
                                was received; and
                                  [(II) the value the claimant 
                                was entitled to receive from 
                                the Corporation on such claim 
                                solely from the proceeds of the 
                                liquidation of the covered 
                                financial company under this 
                                title; and
                          [(ii) if the amounts to be recovered 
                        on a cumulative basis under clause (i) 
                        are insufficient to meet the 
                        requirements of subparagraph (B), after 
                        taking into account the considerations 
                        set forth in paragraph (4), impose 
                        assessments on--
                                  [(I) eligible financial 
                                companies; and
                                  [(II) financial companies 
                                with total consolidated assets 
                                equal to or greater than 
                                $50,000,000,000 that are not 
                                eligible financial companies.
                  [(E) Provision of financing.--Payments or 
                amounts necessary to initiate and continue 
                operations essential to implementation of the 
                receivership or any bridge financial company 
                described in subparagraph (D)(i) shall not 
                include the provision of financing, as defined 
                by rule of the Corporation, to third parties.
          [(2) Graduated assessment rate.--The Corporation 
        shall impose assessments on a graduated basis, with 
        financial companies having greater assets and risk 
        being assessed at a higher rate.
          [(3) Notification and payment.--The Corporation shall 
        notify each financial company of that company's 
        assessment under this subsection. Any financial company 
        subject to assessment under this subsection shall pay 
        such assessment in accordance with the regulations 
        prescribed pursuant to paragraph (6).
          [(4) Risk-based assessment considerations.--In 
        imposing assessments under paragraph (1)(D)(ii), the 
        Corporation shall use a risk matrix. The Council shall 
        make a recommendation to the Corporation on the risk 
        matrix to be used in imposing such assessments, and the 
        Corporation shall take into account any such 
        recommendation in the establishment of the risk matrix 
        to be used to impose such assessments. In recommending 
        or establishing such risk matrix, the Council and the 
        Corporation, respectively, shall take into account--
                  [(A) economic conditions generally affecting 
                financial companies so as to allow assessments 
                to increase during more favorable economic 
                conditions and to decrease during less 
                favorable economic conditions;
                  [(B) any assessments imposed on a financial 
                company or an affiliate of a financial company 
                that--
                          [(i) is an insured depository 
                        institution, assessed pursuant to 
                        section 7 or 13(c)(4)(G) of the Federal 
                        Deposit Insurance Act;
                          [(ii) is a member of the Securities 
                        Investor Protection Corporation, 
                        assessed pursuant to section 4 of the 
                        Securities Investor Protection Act of 
                        1970 (15 U.S.C. 78ddd);
                          [(iii) is an insured credit union, 
                        assessed pursuant to section 
                        202(c)(1)(A)(i) of the Federal Credit 
                        Union Act (12 U.S.C. 1782(c)(1)(A)(i)); 
                        or
                          [(iv) is an insurance company, 
                        assessed pursuant to applicable State 
                        law to cover (or reimburse payments 
                        made to cover) the costs of the 
                        rehabilitation, liquidation, or other 
                        State insolvency proceeding with 
                        respect to 1 or more insurance 
                        companies;
                  [(C) the risks presented by the financial 
                company to the financial system and the extent 
                to which the financial company has benefitted, 
                or likely would benefit, from the orderly 
                liquidation of a financial company under this 
                title, including--
                          [(i) the amount, different 
                        categories, and concentrations of 
                        assets of the financial company and its 
                        affiliates, including both on-balance 
                        sheet and off-balance sheet assets;
                          [(ii) the activities of the financial 
                        company and its affiliates;
                          [(iii) the relevant market share of 
                        the financial company and its 
                        affiliates;
                          [(iv) the extent to which the 
                        financial company is leveraged;
                          [(v) the potential exposure to sudden 
                        calls on liquidity precipitated by 
                        economic distress;
                          [(vi) the amount, maturity, 
                        volatility, and stability of the 
                        company's financial obligations to, and 
                        relationship with, other financial 
                        companies;
                          [(vii) the amount, maturity, 
                        volatility, and stability of the 
                        liabilities of the company, including 
                        the degree of reliance on short-term 
                        funding, taking into consideration 
                        existing systems for measuring a 
                        company's risk-based capital;
                          [(viii) the stability and variety of 
                        the company's sources of funding;
                          [(ix) the company's importance as a 
                        source of credit for households, 
                        businesses, and State and local 
                        governments and as a source of 
                        liquidity for the financial system;
                          [(x) the extent to which assets are 
                        simply managed and not owned by the 
                        financial company and the extent to 
                        which ownership of assets under 
                        management is diffuse; and
                          [(xi) the amount, different 
                        categories, and concentrations of 
                        liabilities, both insured and 
                        uninsured, contingent and 
                        noncontingent, including both on-
                        balance sheet and off-balance sheet 
                        liabilities, of the financial company 
                        and its affiliates;
                  [(D) any risks presented by the financial 
                company during the 10-year period immediately 
                prior to the appointment of the Corporation as 
                receiver for the covered financial company that 
                contributed to the failure of the covered 
                financial company; and
                  [(E) such other risk-related factors as the 
                Corporation, or the Council, as applicable, may 
                determine to be appropriate.
          [(5) Collection of information.--The Corporation may 
        impose on covered financial companies such collection 
        of information requirements as the Corporation deems 
        necessary to carry out this subsection after the 
        appointment of the Corporation as receiver under this 
        title.
          [(6) Rulemaking.--
                  [(A) In general.--The Corporation shall 
                prescribe regulations to carry out this 
                subsection. The Corporation shall consult with 
                the Secretary in the development and 
                finalization of such regulations.
                  [(B) Equitable treatment.--The regulations 
                prescribed under subparagraph (A) shall take 
                into account the differences in risks posed to 
                the financial stability of the United States by 
                financial companies, the differences in the 
                liability structures of financial companies, 
                and the different bases for other assessments 
                that such financial companies may be required 
                to pay, to ensure that assessed financial 
                companies are treated equitably and that 
                assessments under this subsection reflect such 
                differences.
  [(p) Unenforceability of Certain Agreements.--
          [(1) In general.--No provision described in paragraph 
        (2) shall be enforceable against or impose any 
        liability on any person, as such enforcement or 
        liability shall be contrary to public policy.
          [(2) Prohibited provisions.--A provision described in 
        this paragraph is any term contained in any existing or 
        future standstill, confidentiality, or other agreement 
        that, directly or indirectly--
                  [(A) affects, restricts, or limits the 
                ability of any person to offer to acquire or 
                acquire;
                  [(B) prohibits any person from offering to 
                acquire or acquiring; or
                  [(C) prohibits any person from using any 
                previously disclosed information in connection 
                with any such offer to acquire or acquisition 
                of,
        all or part of any covered financial company, including 
        any liabilities, assets, or interest therein, in 
        connection with any transaction in which the 
        Corporation exercises its authority under this title.
  [(q) Other Exemptions.--
          [(1) In general.--When acting as a receiver under 
        this title--
                  [(A) the Corporation, including its 
                franchise, its capital, reserves and surplus, 
                and its income, shall be exempt from all 
                taxation imposed by any State, county, 
                municipality, or local taxing authority, except 
                that any real property of the Corporation shall 
                be subject to State, territorial, county, 
                municipal, or local taxation to the same extent 
                according to its value as other real property 
                is taxed, except that, notwithstanding the 
                failure of any person to challenge an 
                assessment under State law of the value of such 
                property, such value, and the tax thereon, 
                shall be determined as of the period for which 
                such tax is imposed;
                  [(B) no property of the Corporation shall be 
                subject to levy, attachment, garnishment, 
                foreclosure, or sale without the consent of the 
                Corporation, nor shall any involuntary lien 
                attach to the property of the Corporation; and
                  [(C) the Corporation shall not be liable for 
                any amounts in the nature of penalties or 
                fines, including those arising from the failure 
                of any person to pay any real property, 
                personal property, probate, or recording tax or 
                any recording or filing fees when due; and
                  [(D) the Corporation shall be exempt from all 
                prosecution by the United States or any State, 
                county, municipality, or local authority for 
                any criminal offense arising under Federal, 
                State, county, municipal, or local law, which 
                was allegedly committed by the covered 
                financial company, or persons acting on behalf 
                of the covered financial company, prior to the 
                appointment of the Corporation as receiver.
          [(2) Limitation.--Paragraph (1) shall not apply with 
        respect to any tax imposed (or other amount arising) 
        under the Internal Revenue Code of 1986.
  [(r) Certain Sales of Assets Prohibited.--
          [(1) Persons who engaged in improper conduct with, or 
        caused losses to, covered financial companies.--The 
        Corporation shall prescribe regulations which, at a 
        minimum, shall prohibit the sale of assets of a covered 
        financial company by the Corporation to--
                  [(A) any person who--
                          [(i) has defaulted, or was a member 
                        of a partnership or an officer or 
                        director of a corporation that has 
                        defaulted, on 1 or more obligations, 
                        the aggregate amount of which exceeds 
                        $1,000,000, to such covered financial 
                        company;
                          [(ii) has been found to have engaged 
                        in fraudulent activity in connection 
                        with any obligation referred to in 
                        clause (i); and
                          [(iii) proposes to purchase any such 
                        asset in whole or in part through the 
                        use of the proceeds of a loan or 
                        advance of credit from the Corporation 
                        or from any covered financial company;
                  [(B) any person who participated, as an 
                officer or director of such covered financial 
                company or of any affiliate of such company, in 
                a material way in any transaction that resulted 
                in a substantial loss to such covered financial 
                company; or
                  [(C) any person who has demonstrated a 
                pattern or practice of defalcation regarding 
                obligations to such covered financial company.
          [(2) Convicted debtors.--Except as provided in 
        paragraph (3), a person may not purchase any asset of 
        such institution from the receiver, if that person--
                  [(A) has been convicted of an offense under 
                section 215, 656, 657, 1005, 1006, 1007, 1008, 
                1014, 1032, 1341, 1343, or 1344 of title 18, 
                United States Code, or of conspiring to commit 
                such an offense, affecting any covered 
                financial company; and
                  [(B) is in default on any loan or other 
                extension of credit from such covered financial 
                company which, if not paid, will cause 
                substantial loss to the Fund or the 
                Corporation.
          [(3) Settlement of claims.--Paragraphs (1) and (2) 
        shall not apply to the sale or transfer by the 
        Corporation of any asset of any covered financial 
        company to any person, if the sale or transfer of the 
        asset resolves or settles, or is part of the resolution 
        or settlement, of 1 or more claims that have been, or 
        could have been, asserted by the Corporation against 
        the person.
          [(4) Definition of default.--For purposes of this 
        subsection, the term ``default'' means a failure to 
        comply with the terms of a loan or other obligation to 
        such an extent that the property securing the 
        obligation is foreclosed upon.
  [(s) Recoupment of Compensation From Senior Executives and 
Directors.--
          [(1) In general.--The Corporation, as receiver of a 
        covered financial company, may recover from any current 
        or former senior executive or director substantially 
        responsible for the failed condition of the covered 
        financial company any compensation received during the 
        2-year period preceding the date on which the 
        Corporation was appointed as the receiver of the 
        covered financial company, except that, in the case of 
        fraud, no time limit shall apply.
          [(2) Cost considerations.--In seeking to recover any 
        such compensation, the Corporation shall weigh the 
        financial and deterrent benefits of such recovery 
        against the cost of executing the recovery.
          [(3) Rulemaking.--The Corporation shall promulgate 
        regulations to implement the requirements of this 
        subsection, including defining the term 
        ``compensation'' to mean any financial remuneration, 
        including salary, bonuses, incentives, benefits, 
        severance, deferred compensation, or golden parachute 
        benefits, and any profits realized from the sale of the 
        securities of the covered financial company.

[SEC. 211. MISCELLANEOUS PROVISIONS.

  [(a) Clarification of Prohibition Regarding Concealment of 
Assets From Receiver or Liquidating Agent.--Section 1032(1) of 
title 18, United States Code, is amended by inserting ``the 
Federal Deposit Insurance Corporation acting as receiver for a 
covered financial company, in accordance with title II of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act,'' 
before ``or the National Credit''.
  [(b) Conforming Amendment.--Section 1032 of title 18, United 
States Code, is amended in the section heading, by striking 
``of financial institution''.
  [(c) Federal Deposit Insurance Corporation Improvement Act of 
1991.--Section 403(a) of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 4403(a)) is 
amended by inserting ``section 210(c) of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, section 1367 of the 
Federal Housing Enterprises Financial Safety and Soundness Act 
of 1992 (12 U.S.C. 4617(d)),'' after ``section 11(e) of the 
Federal Deposit Insurance Act,''.
  [(d) FDIC Inspector General Reviews.--
          [(1) Scope.--The Inspector General of the Corporation 
        shall conduct, supervise, and coordinate audits and 
        investigations of the liquidation of any covered 
        financial company by the Corporation as receiver under 
        this title, including collecting and summarizing--
                  [(A) a description of actions taken by the 
                Corporation as receiver;
                  [(B) a description of any material sales, 
                transfers, mergers, obligations, purchases, and 
                other material transactions entered into by the 
                Corporation;
                  [(C) an evaluation of the adequacy of the 
                policies and procedures of the Corporation 
                under section 203(d) and orderly liquidation 
                plan under section 210(n)(14);
                  [(D) an evaluation of the utilization by the 
                Corporation of the private sector in carrying 
                out its functions, including the adequacy of 
                any conflict-of-interest reviews; and
                  [(E) an evaluation of the overall performance 
                of the Corporation in liquidating the covered 
                financial company, including administrative 
                costs, timeliness of liquidation process, and 
                impact on the financial system.
          [(2) Frequency.--Not later than 6 months after the 
        date of appointment of the Corporation as receiver 
        under this title and every 6 months thereafter, the 
        Inspector General of the Corporation shall conduct the 
        audit and investigation described in paragraph (1).
          [(3) Reports and testimony.--The Inspector General of 
        the Corporation shall include in the semiannual reports 
        required by section 5(a) of the Inspector General Act 
        of 1978 (5 U.S.C. App.), a summary of the findings and 
        evaluations under paragraph (1), and shall appear 
        before the appropriate committees of Congress, if 
        requested, to present each such report.
          [(4) Funding.--
                  [(A) Initial funding.--The expenses of the 
                Inspector General of the Corporation in 
                carrying out this subsection shall be 
                considered administrative expenses of the 
                receivership.
                  [(B) Additional funding.--If the maximum 
                amount available to the Corporation as receiver 
                under this title is insufficient to enable the 
                Inspector General of the Corporation to carry 
                out the duties under this subsection, the 
                Corporation shall pay such additional amounts 
                from assessments imposed under section 210.
          [(5) Termination of responsibilities.--The duties and 
        responsibilities of the Inspector General of the 
        Corporation under this subsection shall terminate 1 
        year after the date of termination of the receivership 
        under this title.
  [(e) Treasury Inspector General Reviews.--
          [(1) Scope.--The Inspector General of the Department 
        of the Treasury shall conduct, supervise, and 
        coordinate audits and investigations of actions taken 
        by the Secretary related to the liquidation of any 
        covered financial company under this title, including 
        collecting and summarizing--
                  [(A) a description of actions taken by the 
                Secretary under this title;
                  [(B) an analysis of the approval by the 
                Secretary of the policies and procedures of the 
                Corporation under section 203 and acceptance of 
                the orderly liquidation plan of the Corporation 
                under section 210; and
                  [(C) an assessment of the terms and 
                conditions underlying the purchase by the 
                Secretary of obligations of the Corporation 
                under section 210.
          [(2) Frequency.--Not later than 6 months after the 
        date of appointment of the Corporation as receiver 
        under this title and every 6 months thereafter, the 
        Inspector General of the Department of the Treasury 
        shall conduct the audit and investigation described in 
        paragraph (1).
          [(3) Reports and testimony.--The Inspector General of 
        the Department of the Treasury shall include in the 
        semiannual reports required by section 5(a) of the 
        Inspector General Act of 1978 (5 U.S.C. App.), a 
        summary of the findings and assessments under paragraph 
        (1), and shall appear before the appropriate committees 
        of Congress, if requested, to present each such report.
          [(4) Termination of responsibilities.--The duties and 
        responsibilities of the Inspector General of the 
        Department of the Treasury under this subsection shall 
        terminate 1 year after the date on which the 
        obligations purchased by the Secretary from the 
        Corporation under section 210 are fully redeemed.
  [(f) Primary Financial Regulatory Agency Inspector General 
Reviews.--
          [(1) Scope.--Upon the appointment of the Corporation 
        as receiver for a covered financial company supervised 
        by a Federal primary financial regulatory agency or the 
        Board of Governors under section 165, the Inspector 
        General of the agency or the Board of Governors shall 
        make a written report reviewing the supervision by the 
        agency or the Board of Governors of the covered 
        financial company, which shall--
                  [(A) evaluate the effectiveness of the agency 
                or the Board of Governors in carrying out its 
                supervisory responsibilities with respect to 
                the covered financial company;
                  [(B) identify any acts or omissions on the 
                part of agency or Board of Governors officials 
                that contributed to the covered financial 
                company being in default or in danger of 
                default;
                  [(C) identify any actions that could have 
                been taken by the agency or the Board of 
                Governors that would have prevented the company 
                from being in default or in danger of default; 
                and
                  [(D) recommend appropriate administrative or 
                legislative action.
          [(2) Reports and testimony.--Not later than 1 year 
        after the date of appointment of the Corporation as 
        receiver under this title, the Inspector General of the 
        Federal primary financial regulatory agency or the 
        Board of Governors shall provide the report required by 
        paragraph (1) to such agency or the Board of Governors, 
        and along with such agency or the Board of Governors, 
        as applicable, shall appear before the appropriate 
        committees of Congress, if requested, to present the 
        report required by paragraph (1). Not later than 90 
        days after the date of receipt of the report required 
        by paragraph (1), such agency or the Board of 
        Governors, as applicable, shall provide a written 
        report to Congress describing any actions taken in 
        response to the recommendations in the report, and if 
        no such actions were taken, describing the reasons why 
        no actions were taken.

[SEC. 212. PROHIBITION OF CIRCUMVENTION AND PREVENTION OF CONFLICTS OF 
                    INTEREST.

  [(a) No Other Funding.--Funds for the orderly liquidation of 
any covered financial company under this title shall only be 
provided as specified under this title.
  [(b) Limit on Governmental Actions.--No governmental entity 
may take any action to circumvent the purposes of this title.
  [(c) Conflict of Interest.--In the event that the Corporation 
is appointed receiver for more than 1 covered financial company 
or is appointed receiver for a covered financial company and 
receiver for any insured depository institution that is an 
affiliate of such covered financial company, the Corporation 
shall take appropriate action, as necessary to avoid any 
conflicts of interest that may arise in connection with 
multiple receiverships.

[SEC. 213. BAN ON CERTAIN ACTIVITIES BY SENIOR EXECUTIVES AND 
                    DIRECTORS.

  [(a) Prohibition Authority.--The Board of Governors or, if 
the covered financial company was not supervised by the Board 
of Governors, the Corporation, may exercise the authority 
provided by this section.
  [(b) Authority To Issue Order.--The appropriate agency 
described in subsection (a) may take any action authorized by 
subsection (c), if the agency determines that--
          [(1) a senior executive or a director of the covered 
        financial company, prior to the appointment of the 
        Corporation as receiver, has, directly or indirectly--
                  [(A) violated--
                          [(i) any law or regulation;
                          [(ii) any cease-and-desist order 
                        which has become final;
                          [(iii) any condition imposed in 
                        writing by a Federal agency in 
                        connection with any action on any 
                        application, notice, or request by such 
                        company or senior executive; or
                          [(iv) any written agreement between 
                        such company and such agency;
                  [(B) engaged or participated in any unsafe or 
                unsound practice in connection with any 
                financial company; or
                  [(C) committed or engaged in any act, 
                omission, or practice which constitutes a 
                breach of the fiduciary duty of such senior 
                executive or director;
          [(2) by reason of the violation, practice, or breach 
        described in any subparagraph of paragraph (1), such 
        senior executive or director has received financial 
        gain or other benefit by reason of such violation, 
        practice, or breach and such violation, practice, or 
        breach contributed to the failure of the company; and
          [(3) such violation, practice, or breach--
                  [(A) involves personal dishonesty on the part 
                of such senior executive or director; or
                  [(B) demonstrates willful or continuing 
                disregard by such senior executive or director 
                for the safety or soundness of such company.
  [(c) Authorized Actions.--
          [(1) In general.--The appropriate agency for a 
        financial company, as described in subsection (a), may 
        serve upon a senior executive or director described in 
        subsection (b) a written notice of the intention of the 
        agency to prohibit any further participation by such 
        person, in any manner, in the conduct of the affairs of 
        any financial company for a period of time determined 
        by the appropriate agency to be commensurate with such 
        violation, practice, or breach, provided such period 
        shall be not less than 2 years.
          [(2) Procedures.--The due process requirements and 
        other procedures under section 8(e) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(e)) shall apply 
        to actions under this section as if the covered 
        financial company were an insured depository 
        institution and the senior executive or director were 
        an institution-affiliated party, as those terms are 
        defined in that Act.
  [(d) Regulations.--The Corporation and the Board of 
Governors, in consultation with the Council, shall jointly 
prescribe rules or regulations to administer and carry out this 
section, including rules, regulations, or guidelines to further 
define the term senior executive for the purposes of this 
section.

[SEC. 214. PROHIBITION ON TAXPAYER FUNDING.

  [(a) Liquidation Required.--All financial companies put into 
receivership under this title shall be liquidated. No taxpayer 
funds shall be used to prevent the liquidation of any financial 
company under this title.
  [(b) Recovery of Funds.--All funds expended in the 
liquidation of a financial company under this title shall be 
recovered from the disposition of assets of such financial 
company, or shall be the responsibility of the financial 
sector, through assessments.
  [(c) No Losses to Taxpayers.--Taxpayers shall bear no losses 
from the exercise of any authority under this title.

[SEC. 215. STUDY ON SECURED CREDITOR HAIRCUTS.

  [(a) Study Required.--The Council shall conduct a study 
evaluating the importance of maximizing United States taxpayer 
protections and promoting market discipline with respect to the 
treatment of fully secured creditors in the utilization of the 
orderly liquidation authority authorized by this Act. In 
carrying out such study, the Council shall--
          [(1) not be prejudicial to current or past laws or 
        regulations with respect to secured creditor treatment 
        in a resolution process;
          [(2) study the similarities and differences between 
        the resolution mechanisms authorized by the Bankruptcy 
        Code, the Federal Deposit Insurance Corporation 
        Improvement Act of 1991, and the orderly liquidation 
        authority authorized by this Act;
          [(3) determine how various secured creditors are 
        treated in such resolution mechanisms and examine how a 
        haircut (of various degrees) on secured creditors could 
        improve market discipline and protect taxpayers;
          [(4) compare the benefits and dynamics of prudent 
        lending practices by depository institutions in secured 
        loans for consumers and small businesses to the lending 
        practices of secured creditors to large, interconnected 
        financial firms;
          [(5) consider whether credit differs according to 
        different types of collateral and different terms and 
        timing of the extension of credit; amd
          [(6) include an examination of stakeholders who were 
        unsecured or under-collateralized and seek collateral 
        when a firm is failing, and the impact that such 
        behavior has on financial stability and an orderly 
        resolution that protects taxpayers if the firm fails.
  [(b) Report.--Not later than the end of the 1-year period 
beginning on the date of enactment of this Act, the Council 
shall issue a report to the Congress containing all findings 
and conclusions made by the Council in carrying out the study 
required under subsection (a).

[SEC. 216. STUDY ON BANKRUPTCY PROCESS FOR FINANCIAL AND NONBANK 
                    FINANCIAL INSTITUTIONS.

  [(a) Study.--
          [(1) In general.--Upon enactment of this Act, the 
        Board of Governors, in consultation with the 
        Administrative Office of the United States Courts, 
        shall conduct a study regarding the resolution of 
        financial companies under the Bankruptcy Code, under 
        chapter 7 or 11 thereof.
          [(2) Issues to be studied.--Issues to be studied 
        under this section include--
                  [(A) the effectiveness of chapter 7 and 
                chapter 11 of the Bankruptcy Code in 
                facilitating the orderly resolution or 
                reorganization of systemic financial companies;
                  [(B) whether a special financial resolution 
                court or panel of special masters or judges 
                should be established to oversee cases 
                involving financial companies to provide for 
                the resolution of such companies under the 
                Bankruptcy Code, in a manner that minimizes 
                adverse impacts on financial markets without 
                creating moral hazard;
                  [(C) whether amendments to the Bankruptcy 
                Code should be adopted to enhance the ability 
                of the Code to resolve financial companies in a 
                manner that minimizes adverse impacts on 
                financial markets without creating moral 
                hazard;
                  [(D) whether amendments should be made to the 
                Bankruptcy Code, the Federal Deposit Insurance 
                Act, and other insolvency laws to address the 
                manner in which qualified financial contracts 
                of financial companies are treated; and
                  [(E) the implications, challenges, and 
                benefits to creating a new chapter or 
                subchapter of the Bankruptcy Code to deal with 
                financial companies.
  [(b) Reports to Congress.--Not later than 1 year after the 
date of enactment of this Act, and in each successive year 
until the fifth year after the date of enactment of this Act, 
the Administrative Office of the United States courts shall 
submit to the Committees on Banking, Housing, and Urban Affairs 
and the Judiciary of the Senate and the Committees on Financial 
Services and the Judiciary of the House of Representatives a 
report summarizing the results of the study conducted under 
subsection (a).

[SEC. 217. STUDY ON INTERNATIONAL COORDINATION RELATING TO BANKRUPTCY 
                    PROCESS FOR NONBANK FINANCIAL INSTITUTIONS.

  [(a) Study.--
          [(1) In general.--The Board of Governors, in 
        consultation with the Administrative Office of the 
        United States Courts, shall conduct a study regarding 
        international coordination relating to the resolution 
        of systemic financial companies under the United States 
        Bankruptcy Code and applicable foreign law.
          [(2) Issues to be studied.--With respect to the 
        bankruptcy process for financial companies, issues to 
        be studied under this section include--
                  [(A) the extent to which international 
                coordination currently exists;
                  [(B) current mechanisms and structures for 
                facilitating international cooperation;
                  [(C) barriers to effective international 
                coordination; and
                  [(D) ways to increase and make more effective 
                international coordination of the resolution of 
                financial companies, so as to minimize the 
                impact on the financial system without creating 
                moral hazard.
  [(b) Report to Congress.--Not later than 1 year after the 
date of enactment of this Act, the Administrative office of the 
United States Courts shall submit to the Committees on Banking, 
Housing, and Urban Affairs and the Judiciary of the Senate and 
the Committees on Financial Services and the Judiciary of the 
House of Representatives a report summarizing the results of 
the study conducted under subsection (a).]

           *       *       *       *       *       *       *


TITLE VII--WALL STREET TRANSPARENCY AND ACCOUNTABILITY

           *       *       *       *       *       *       *


        Subtitle A--Regulation of Over-the-Counter Swaps Markets

PART I--REGULATORY AUTHORITY

           *       *       *       *       *       *       *


SEC. 716. PROHIBITION AGAINST FEDERAL GOVERNMENT BAILOUTS OF SWAPS 
                    ENTITIES.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Excluded Entities.--For purposes of this section, the 
term ``swaps entity'' shall not include any insured depository 
institution under the Federal Deposit Insurance Act [or a 
covered financial company under title II] which is in a 
conservatorship, receivership, or a bridge bank operated by the 
Federal Deposit Insurance Corporation.

           *       *       *       *       *       *       *


TITLE XI--FEDERAL RESERVE SYSTEM PROVISIONS

           *       *       *       *       *       *       *


SEC. 1100D. AMENDMENTS TO THE PAPERWORK REDUCTION ACT.

  [(a) Designation as an Independent Agency.--Section 2(5) of 
the Paperwork Reduction Act (44 U.S.C. 3502(5)) is amended by 
inserting ``the Bureau of Consumer Financial Protection, the 
Office of Financial Research,'' after ``the Securities and 
Exchange Commission,''.]
  (a) Designation as an Independent Agency.--Section 3502(5) of 
subchapter I of chapter 35 of title 44, United States Code 
(commonly known as the Paperwork Reduction Act) is amended by 
inserting ``the Bureau of Consumer Financial Protection,'' 
after ``the Securities and Exchange Commission,''.

           *       *       *       *       *       *       *


SEC. 1105. EMERGENCY FINANCIAL STABILIZATION.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Funding.--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Authority of the secretary.--The Secretary may 
        purchase any obligations issued under paragraph (3)(A). 
        For such purpose, the Secretary may use the proceeds of 
        the sale of any securities issued under chapter 31 of 
        title 31, United States Code, and the purposes for 
        which securities may be issued under that chapter 31 
        are extended to include such purchases, and the [amount 
        of any securities issued under that chapter 31 for such 
        purpose shall be treated in the same manner as 
        securities issued under section 208(n)(5)(E)] issuances 
        of such securities under that chapter 31 for such 
        purpose shall by treated as public debt transactions of 
        the United States, and the proceeds from the sale of 
        any obligations acquired by the Secretary under this 
        paragraph shall be deposited into the Treasury of the 
        United States as miscellaneous receipts.

           *       *       *       *       *       *       *


SEC. 1106. ADDITIONAL RELATED AMENDMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Effect of Default on an FDIC Guarantee.--If an insured 
depository institution or depository institution holding 
company (as those terms are defined in section 3 of the Federal 
Deposit Insurance Act) participating in a program under section 
1105, or any participant in a debt guarantee program 
established pursuant to section 13(c)(4)(G)(i) of the Federal 
Deposit Insurance Act defaults on any obligation guaranteed by 
the Corporation after the date of enactment of this Act, the 
Corporation shall--
          (1) * * *
          (2) with respect to any other participating company 
        that is not an insured depository institution that 
        defaults--
                  [(A) require--
                          [(i) consideration of whether a 
                        determination shall be made, as 
                        provided in section 203 to resolve the 
                        company under section 202; and
                          [(ii) the company to file a petition 
                        for bankruptcy under section 301 of 
                        title 11, United States Code, if the 
                        Corporation is not appointed receiver 
                        pursuant to section 202 within 30 days 
                        of the date of default; or]
                  (A) require the company to file a petition 
                for bankruptcy under section 301 of title 11, 
                United States Code; or

           *       *       *       *       *       *       *

                              ----------                              


FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


  Sec. 10. (a) * * *
  (b) Examinations.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Special examination of any insured depository 
        institution.--
                  (A) In general.--In addition to the 
                examinations authorized under paragraph (2), 
                any examiner appointed under paragraph (1) 
                shall have power, on behalf of the Corporation, 
                to make any special examination of any insured 
                depository institution or nonbank financial 
                company supervised by the Board of Governors or 
                a bank holding company described in section 
                165(a) of the Financial Stability Act of 2010, 
                whenever the Board of Directors determines that 
                a special examination of any such depository 
                institution is necessary to determine the 
                condition of such depository institution for 
                insurance purposes[, or of such nonbank 
                financial company supervised by the Board of 
                Governors or bank holding company described in 
                section 165(a) of the Financial Stability Act 
                of 2010, for the purpose of implementing its 
                authority to provide for orderly liquidation of 
                any such company under title II of that Act], 
                provided that such authority may not be used 
                with respect to any such company that is in a 
                generally sound condition.

           *       *       *       *       *       *       *

                              ----------                              


FEDERAL RESERVE ACT

           *       *       *       *       *       *       *


                    POWERS OF FEDERAL RESERVE BANKS.

  Sec. 13. Any Federal reserve bank may receive from any of its 
member banks or other depository institutions, and from the 
United States, deposits of current funds in lawful money, 
national-bank notes, Federal reserve notes, or checks, and 
drafts, payable upon presentation or other items, and also, for 
collection, maturing notes and bills; or, solely for purposes 
of exchange or of collection, may receive from other Federal 
reserve banks deposits of current funds in lawful money, 
national-bank notes, or checks upon other Federal reserve 
banks, and checks and drafts, payable upon presentation within 
its district or other items, and maturing notes and bills 
payable within its district; or, solely for the purposes of 
exchange or of collection, may receive from any nonmember bank 
or trust company or other depository institution deposits of 
current funds in lawful money, national-bank notes, Federal 
reserve notes, checks and drafts payable upon presentation or 
other items, or maturing notes and bills: Provided, Such 
nonmember bank or trust company or other depository institution 
maintains with the Federal reserve bank of its district a 
balance in such amount as the Board determines taking into 
account items in transit, services provided by the Federal 
Reserve bank, and other factors as the Board may deem 
appropriate: Provided further, That nothing in this or any 
other section of this Act shall be construed as prohibiting a 
member or nonmember bank or other depository institution from 
making reasonable charges, to be determined and regulated by 
the Board of Governors of the Federal Reserve System, but in no 
case to exceed 10 cents per $100 or fraction thereof, based on 
the total of checks and drafts presented at any one time, for 
collection or payment of checks and drafts and remission 
therefor by exchange or otherwise; but no such charges shall be 
made against the Federal reserve banks.
  Upon the indorsement of any of its member banks, which shall 
be deemed a waiver of demand, notice and protest by such bank 
as to its own indorsement exclusively, any Federal reserve bank 
may discount notes, drafts, and bills of exchange arising out 
of actual commercial transactions; that is, notes, drafts, and 
bills of exchange issued or drawn for agricultural, industrial, 
or commercial purposes, or the proceeds of which have been 
used, or are to be used, for such purposes, the Board of 
Governors of the Federal Reserve System to have the right to 
determine or define the character of the paper thus eligible 
for discount, within the meaning of this Act. Nothing in this 
Act contained shall be construed to prohibit such notes, 
drafts, and bills of exchange, secured by staple agricultural 
products, or other goods, wares, or merchandise from being 
eligible for such discount, and the notes, drafts, and bills of 
exchange of factors issued as such making advances exclusively 
to producers of staple agricultural products in their raw state 
shall be eligible for such discount; but such definition shall 
not include notes, drafts, or bills covering merely investments 
or issued or drawn for the purpose of carrying or trading in 
stocks, bonds, or other investment securities, except bonds and 
notes of the Government of the United States. Notes, drafts, 
and bills admitted to discount under the terms of this 
paragraph must have a maturity at the time of discount of not 
more than 90 days, exclusive of grace.
  (3)(A) * * *
          (B)(i) * * *
                  (ii) The Board shall establish procedures to 
                prohibit borrowing from programs and facilities 
                by borrowers that are insolvent. Such 
                procedures may include a certification from the 
                chief executive officer (or other authorized 
                officer) of the borrower, at the time the 
                borrower initially borrows under the program or 
                facility (with a duty by the borrower to update 
                the certification if the information in the 
                certification materially changes), that the 
                borrower is not insolvent. A borrower shall be 
                considered insolvent for purposes of this 
                subparagraph, if the borrower is in 
                bankruptcy[, resolution under title II of the 
                Dodd-Frank Wall Street Reform and Consumer 
                Protection Act, or] or is subject to resolution 
                under any other Federal or State insolvency 
                proceeding.
                  (iii) A program or facility that is 
                structured to remove assets from the balance 
                sheet of a single and specific company, or that 
                is established for the purpose of assisting a 
                single and specific company avoid bankruptcy[, 
                resolution under title II of the Dodd-Frank 
                Wall Street Reform and Consumer Protection Act, 
                or] or resolution under any other Federal or 
                State insolvency proceeding, shall not be 
                considered a program or facility with broad-
                based eligibility.

           *       *       *       *       *       *       *

          [(E) If an entity to which a Federal reserve bank has 
        provided a loan under this paragraph becomes a covered 
        financial company, as defined in section 201 of the 
        Dodd-Frank Wall Street Reform and Consumer Protection 
        Act, at any time while such loan is outstanding, and 
        the Federal reserve bank incurs a realized net loss on 
        the loan, then the Federal reserve bank shall have a 
        claim equal to the amount of the net realized loss 
        against the covered entity, with the same priority as 
        an obligation to the Secretary of the Treasury under 
        section 210(b) of the Dodd-Frank Wall Street Reform and 
        Consumer Protection Act. ]

           *       *       *       *       *       *       *

                              ----------                              


              EMERGENCY ECONOMIC STABILIZATION ACT OF 2008

DIVISION A--EMERGENCY ECONOMIC STABILIZATION

           *       *       *       *       *       *       *


TITLE I--TROUBLED ASSETS RELIEF PROGRAM

           *       *       *       *       *       *       *


SEC. 120. TERMINATION OF AUTHORITY.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Termination of Authority To Provide New Assistance Under 
the Home Affordable Modification Program.--
          (1) In general.--Except as provided under paragraph 
        (2), after the date of the enactment of this subsection 
        the Secretary may not provide any assistance under the 
        Home Affordable Modification Program under the Making 
        Home Affordable initiative of the Secretary, authorized 
        under this Act, on behalf of any homeowner.
          (2) Protection of existing obligations on behalf of 
        homeowners already extended an offer to participate in 
        the program.--Paragraph (1) shall not apply with 
        respect to assistance provided on behalf of a homeowner 
        who, before the date of the enactment of this 
        subsection, was extended an offer to participate in the 
        Home Affordable Modification Program on a trial or 
        permanent basis.
          (3) Deficit reduction.--
                  (A) Use of unobligated funds.--
                Notwithstanding any other provision of this 
                title, the amounts described in subparagraph 
                (B) shall not be available after the date of 
                the enactment of this subsection for obligation 
                or expenditure under the Home Affordable 
                Modification Program of the Secretary, but 
                should be covered into the General Fund of the 
                Treasury and should be used only for reducing 
                the budget deficit of the Federal Government.
                  (B) Identification of unobligated funds.--The 
                amounts described in this subparagraph are any 
                amounts made available under title I of the 
                Emergency Economic Stabilization Act of 2008 
                that--
                          (i) have been allocated for use, but 
                        not yet obligated as of the date of the 
                        enactment of this subsection, under the 
                        Home Affordable Modification Program of 
                        the Secretary; and
                          (ii) are not necessary for providing 
                        assistance under such Program on behalf 
                        of homeowners who, pursuant to 
                        paragraph (2), may be provided 
                        assistance after the date of the 
                        enactment of this subsection.
          (4) Study of use of program by members of the armed 
        forces, veterans, and gold star recipients.--
                  (A) Study.--The Secretary shall conduct a 
                study to determine the extent of usage of the 
                Home Affordable Modification Program by, and 
                the impact of such Program on, covered 
                homeowners.
                  (B) Report.--Not later than the expiration of 
                the 90-day period beginning on the date of the 
                enactment of this subsection, the Secretary 
                shall submit to the Congress a report setting 
                forth the results of the study under 
                subparagraph (A) and identifying best 
                practices, derived from studying the Home 
                Affordable Modification Program, that could be 
                applied to existing mortgage assistance 
                programs available to covered homeowners.
                  (C) Covered homeowner.--For purposes of this 
                subsection, the term ``covered homeowner'' 
                means a homeowner who is--
                          (i) a member of the Armed Forces of 
                        the United States on active duty or the 
                        spouse or parent of such a member;
                          (ii) a veteran, as such term is 
                        defined in section 101 of title 38, 
                        United States Code; or
                          (iii) eligible to receive a Gold Star 
                        lapel pin under section 1126 of title 
                        10, United States Code, as a widow, 
                        parent, or next of kin of a member of 
                        the Armed Forces person who died in a 
                        manner described in subsection (a) of 
                        such section.
          (5) Publication of member availability for 
        assistance.--Not later than 5 days after the date of 
        the enactment of this subsection, the Secretary of the 
        Treasury shall publish to its Website on the World Wide 
        Web in a prominent location, large point font, and 
        boldface type the following statement: ``The Home 
        Affordable Modification Program (HAMP) has been 
        terminated. If you are having trouble paying your 
        mortgage and need help contacting your lender or 
        servicer for purposes of negotiating or acquiring a 
        loan modification, please contact your Member of 
        Congress to assist you in contacting your lender or 
        servicer for the purpose of negotiating or acquiring a 
        loan modification.''.
          (6) Notification to hamp applicants required.--Not 
        later than 30 days after the date of the enactment of 
        this subsection, the Secretary of the Treasury shall 
        inform each individual who applied for the Home 
        Affordable Modification Program and will not be 
        considered for a modification under such Program due to 
        termination of such Program under this subsection--
                  (A) that such Program has been terminated;
                  (B) that loan modifications under such 
                Program are no longer available;
                  (C) of the name and contact information of 
                such individual's Member of Congress; and
                  (D) that the individual should contact his or 
                her Member of Congress to assist the individual 
                in contacting the individual's lender or 
                servicer for the purpose of negotiating or 
                acquiring a loan modification.

           *       *       *       *       *       *       *

                              ----------                              


CONSUMER FINANCIAL PROTECTION ACT OF 2010

           *       *       *       *       *       *       *


TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION

           *       *       *       *       *       *       *


Subtitle A--Bureau of Consumer Financial Protection

           *       *       *       *       *       *       *


SEC. 1017. FUNDING; PENALTIES AND FINES.--

  (a) [Transfer of Funds From Board Of Governors.--] Budget, 
Financial Management, and Audit._
          [(1) In general.--Each year (or quarter of such 
        year), beginning on the designated transfer date, and 
        each quarter thereafter, the Board of Governors shall 
        transfer to the Bureau from the combined earnings of 
        the Federal Reserve System, the amount determined by 
        the Director to be reasonably necessary to carry out 
        the authorities of the Bureau under Federal consumer 
        financial law, taking into account such other sums made 
        available to the Bureau from the preceding year (or 
        quarter of such year).
          [(2) Funding cap.--
                  [(A) In general.--Notwithstanding paragraph 
                (1), and in accordance with this paragraph, the 
                amount that shall be transferred to the Bureau 
                in each fiscal year shall not exceed a fixed 
                percentage of the total operating expenses of 
                the Federal Reserve System, as reported in the 
                Annual Report, 2009, of the Board of Governors, 
                equal to--
                          [(i) 10 percent of such expenses in 
                        fiscal year 2011;
                          [(ii) 11 percent of such expenses in 
                        fiscal year 2012; and
                          [(iii) 12 percent of such expenses in 
                        fiscal year 2013, and in each year 
                        thereafter.
                  [(B) Adjustment of amount.--The dollar amount 
                referred to in subparagraph (A)(iii) shall be 
                adjusted annually, using the percent increase, 
                if any, in the employment cost index for total 
                compensation for State and local government 
                workers published by the Federal Government, or 
                the successor index thereto, for the 12-month 
                period ending on September 30 of the year 
                preceding the transfer.
                  [(C) Reviewability.--Notwithstanding any 
                other provision in this title, the funds 
                derived from the Federal Reserve System 
                pursuant to this subsection shall not be 
                subject to review by the Committees on 
                Appropriations of the House of Representatives 
                and the Senate.
          [(3) Transition period.--Beginning on the date of 
        enactment of this Act and until the designated transfer 
        date, the Board of Governors shall transfer to the 
        Bureau the amount estimated by the Secretary needed to 
        carry out the authorities granted to the Bureau under 
        Federal consumer financial law, from the date of 
        enactment of this Act until the designated transfer 
        date.]
          [(4)] (1) Budget and financial management.--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(E) Rule of construction.--This subsection 
                may not be construed as implying any obligation 
                on the part of the Director to consult with or 
                obtain the consent or approval of the Director 
                of the Office of Management and Budget with 
                respect to any report, plan, forecast, or other 
                information referred to in subparagraph (A) or 
                any jurisdiction or oversight over the affairs 
                or operations of the Bureau.
                  [(F) Financial statements.--The financial 
                statements of the Bureau shall not be 
                consolidated with the financial statements of 
                either the Board of Governors or the Federal 
                Reserve System.]
          [(5)] (2) Audit of the bureau.--
                  (A) * * *

           *       *       *       *       *       *       *

  [(b) Consumer Financial Protection Fund.--
          [(1) Separate fund in federal reserve established.--
        There is established in the Federal Reserve a separate 
        fund, to be known as the ``Bureau of Consumer Financial 
        Protection Fund'' (referred to in this section as the 
        ``Bureau Fund''). The Bureau Fund shall be maintained 
        and established at a Federal reserve bank, in 
        accordance with such requirements as the Board of 
        Governors may impose.
          [(2) Fund receipts.--All amounts transferred to the 
        Bureau under subsection (a) shall be deposited into the 
        Bureau Fund.
          [(3) Investment authority.--
                  [(A) Amounts in bureau fund may be 
                invested.--The Bureau may request the Board of 
                Governors to direct the investment of the 
                portion of the Bureau Fund that is not, in the 
                judgment of the Bureau, required to meet the 
                current needs of the Bureau.
                  [(B) Eligible investments.--Investments 
                authorized by this paragraph shall be made in 
                obligations of the United States or obligations 
                that are guaranteed as to principal and 
                interest by the United States, with maturities 
                suitable to the needs of the Bureau Fund, as 
                determined by the Bureau.
                  [(C) Interest and proceeds credited.--The 
                interest on, and the proceeds from the sale or 
                redemption of, any obligations held in the 
                Bureau Fund shall be credited to the Bureau 
                Fund.
  [(c) Use of Funds.--
          [(1) In general.--Funds obtained by, transferred to, 
        or credited to the Bureau Fund shall be immediately 
        available to the Bureau and under the control of the 
        Director, and shall remain available until expended, to 
        pay the expenses of the Bureau in carrying out its 
        duties and responsibilities. The compensation of the 
        Director and other employees of the Bureau and all 
        other expenses thereof may be paid from, obtained by, 
        transferred to, or credited to the Bureau Fund under 
        this section.
          [(2) Funds that are not government funds.--Funds 
        obtained by or transferred to the Bureau Fund shall not 
        be construed to be Government funds or appropriated 
        monies.
          [(3) Amounts not subject to apportionment.--
        Notwithstanding any other provision of law, amounts in 
        the Bureau Fund and in the Civil Penalty Fund 
        established under subsection (d) shall not be subject 
        to apportionment for purposes of chapter 15 of title 
        31, United States Code, or under any other authority.
  [(d) Penalties and Fines.--
          [(1) Establishment of victims relief fund.--There is 
        established in the Federal Reserve a separate fund, to 
        be known as the ``Consumer Financial Civil Penalty 
        Fund'' (referred to in this section as the ``Civil 
        Penalty Fund''). The Civil Penalty Fund shall be 
        maintained and established at a Federal reserve bank, 
        in accordance with such requirements as the Board of 
        Governors may impose. If the Bureau obtains a civil 
        penalty against any person in any judicial or 
        administrative action under Federal consumer financial 
        laws, the Bureau shall deposit into the Civil Penalty 
        Fund, the amount of the penalty collected.
          [(2) Payment to victims.--Amounts in the Civil 
        Penalty Fund shall be available to the Bureau, without 
        fiscal year limitation, for payments to the victims of 
        activities for which civil penalties have been imposed 
        under the Federal consumer financial laws. To the 
        extent that such victims cannot be located or such 
        payments are otherwise not practicable, the Bureau may 
        use such funds for the purpose of consumer education 
        and financial literacy programs.]
  [(e)] (b) Authorization of Appropriations; Annual Report.--
          [(1) Determination regarding need for appropriated 
        funds.--
                  [(A) In general.--The Director is authorized 
                to determine that sums available to the Bureau 
                under this section will not be sufficient to 
                carry out the authorities of the Bureau under 
                Federal consumer financial law for the upcoming 
                year.
                  [(B) Report required.--When making a 
                determination under subparagraph (A), the 
                Director shall prepare a report regarding the 
                funding of the Bureau, including the assets and 
                liabilities of the Bureau, and the extent to 
                which the funding needs of the Bureau are 
                anticipated to exceed the level of the amount 
                set forth in subsection (a)(2). The Director 
                shall submit the report to the President and to 
                the Committee on Appropriations of the Senate 
                and the Committee on Appropriations of the 
                House of Representatives.
          [(2) Authorization of appropriations.--If the 
        Director makes the determination and submits the report 
        pursuant to paragraph (1), there are hereby authorized 
        to be appropriated to the Bureau, for the purposes of 
        carrying out the authorities granted in Federal 
        consumer financial law, $200,000,000 for each of fiscal 
        years 2010, 2011, 2012, 2013, and 2014.
          [(3) Apportionment.--Notwithstanding any other 
        provision of law, the amounts in paragraph (2) shall be 
        subject to apportionment under section 1517 of title 
        31, United States Code, and restrictions that generally 
        apply to the use of appropriated funds in title 31, 
        United States Code, and other laws.]
          (1) Authorization of appropriations.--There is 
        authorized to be appropriated $200,000,000 to carry out 
        this title for each of fiscal years 2012 and 2013.
          [(4)] (2) Annual report.--The Director shall prepare 
        and submit a report, on an annual basis, to the 
        Committee on Appropriations of the Senate and the 
        Committee on Appropriations of the House of 
        Representatives regarding the financial operating plans 
        and forecasts of the Director, the financial condition 
        and results of operations of the Bureau, and the 
        sources and application of funds of the Bureau, 
        including any funds appropriated in accordance with 
        this subsection.

           *       *       *       *       *       *       *

                              ----------                              


                  NATIONAL FLOOD INSURANCE ACT OF 1968

                  TITLE XIII--NATIONAL FLOOD INSURANCE

                              SHORT TITLE

  Sec. 1301. This title may be cited as the ``National Flood 
Insurance Act of 1968''.

           *       *       *       *       *       *       *


            CHAPTER I--THE NATIONAL FLOOD INSURANCE PROGRAM

                            BASIC AUTHORITY

  Sec. 1304. (a) To carry out the purposes of this title, the 
[Director] Administrator of the Federal Emergency Management 
Agency is authorized to establish and carry out a national 
flood insurance program which will enable interested persons to 
purchase insurance against loss resulting from physical damage 
to or loss of real property or personal property related 
thereto arising from any flood occurring in the United States.
  (b) Additional Coverage for Compliance With Land Use and 
Control Measures.--The national flood insurance program 
established pursuant to subsection (a) shall enable the 
purchase of insurance to cover the cost of implementing 
measures that are consistent with land use and control measures 
established by the community under section 1361 for--
          (1) * * *

           *       *       *       *       *       *       *

          (3) properties that have sustained flood damage on 
        multiple occasions, if the [Director] Administrator 
        determines that it is cost-effective and in the best 
        interests of the National Flood Insurance Fund to 
        require compliance with the land use and control 
        measures.
          (4) properties for which an offer of mitigation 
        assistance is made under--
                  (A) * * *
                  [(B) section 1368 (Repetitive Loss Priority 
                Program and Individual Priority Property 
                Program);]
                  [(C)] (B) the Hazard Mitigation Grant Program 
                authorized under section 404 of the Robert T. 
                Stafford Disaster Assistance and Emergency 
                Relief Act (42 U.S.C. 5170c);
                  [(D)] (C) the Predisaster Hazard Mitigation 
                Program under section 203 of the Robert T. 
                Stafford Disaster Assistance and Emergency 
                Relief Act (42 U.S.C. 5133); and
                  [(E)] (D) any programs authorized or for 
                which funds are appropriated to address any 
                unmet needs or for which supplemental funds are 
                made available.
The [Director] Administrator shall impose a surcharge on each 
insured of not more than $75 per policy to provide cost of 
compliance coverage in accordance with the provisions of this 
subsection.
  (c) In carrying out the flood insurance program the 
[Director] Administrator shall, to the maxmium extent 
practicable, encourage and arrange for--
          (1) * * *

           *       *       *       *       *       *       *


                    SCOPE OF PROGRAM AND PRIORITIES

  Sec. 1305. (a) In carrying out the flood insurance program 
the [Director] Administrator shall afford a priority to making 
flood insurance available to cover residential properties which 
are designed for the occupancy of from one to four families, 
church properties, and business properties which are owned or 
leased and operated by small business concerns.
  (b) If on the basis of--
          (1) * * *

           *       *       *       *       *       *       *

the [Director] Administrator determines that it would be 
feasible to extend the flood insurance program to cover other 
properties, he may take such action under this title as from 
time to time may be necessary in order to make flood insurance 
available to cover, on such basis as may be feasible, any types 
and classes of--
          (A) * * *

           *       *       *       *       *       *       *

and any such extensions of the program to any types and classes 
of these properties shall from time to time be prescribed in 
regulations.
  (c) The [Director] Administrator shall make flood insurance 
available in only those States or areas (or subdivisions 
thereof) which he has determined have--
          (1) * * *

           *       *       *       *       *       *       *


              NATURE AND LIMITATION OF INSURANCE COVERAGE

  Sec. 1306. (a) The [Director] Administrator shall from time 
to time, after consultation with the advisory committee 
authorized under section 1318, appropriate representatives of 
the pool formed or otherwise created under section 1331, and 
appropriate representatives of the insurance authorities of the 
respective States, provide by regulation for general terms and 
conditions of insurability which shall be applicable to 
properties eligible for flood insurance coverage under section 
1305, including--
          (1) * * *

           *       *       *       *       *       *       *

  (b) In addition to any other terms and conditions under 
subsection (a), such regulations shall provide that--
          (1) any flood insurance coverage based on chargeable 
        premium rates under section 1308 which are less than 
        the estimated premium rates under section 1307(a)(1) 
        shall not exceed--
                  (A) * * *
                  (B) in the case of business properties which 
                are owned or leased and operated by small 
                business concerns, an aggregate liability with 
                respect to any single structure, including any 
                contents thereof related to premises of small 
                business occupants (as term is defined by the 
                [Director] Administrator), which shall be equal 
                to (i) $100,000 plus (ii) $100,000 multiplied 
                by the number of such occupants and shall be 
                allocated among such occupants (or among the 
                occupant or occupants and the owner) under 
                regulations prescribed by the [Director] 
                Administrator; except that the aggregate 
                liability for the structure itself may in no 
                case exceed $100,000; and

           *       *       *       *       *       *       *

          (2) [in the case of any residential property] in the 
        case of any residential building designed for the 
        occupancy of from one to four families for which the 
        risk premium rate is determined in accordance with the 
        provisions of section 1307(a)(1), additional flood 
        insurance in excess of the limits specified in clause 
        (i) of subparagraph (A) of paragraph (1) [shall be made 
        available to every insured upon renewal and every 
        applicant for insurance so as to enable such insured or 
        applicant to receive coverage up to a total amount 
        (including such limits specified in paragraph 
        (1)(A)(i)) of $250,000] shall be made available, with 
        respect to any single such building, up to an aggregate 
        liability (including such limits specified in paragraph 
        (1)(A)(i)) of $250,000;

           *       *       *       *       *       *       *

          (4) [in the case of any nonresidential property, 
        including churches,] in the case of any nonresidential 
        building, including a church, for which the risk 
        premium rate is determined in accordance with the 
        provisions of section 1307(a)(1), additional flood 
        insurance in excess of the limits specified in 
        subparagraphs (B) and (C) of paragraph (1) [shall be 
        made available to every insured upon renewal and every 
        applicant for insurance, in respect to any single 
        structure, up to a total amount (including such limit 
        specified in subparagraph (B) or (C) of paragraph (1), 
        as applicable) of $500,000 for each structure and 
        $500,000 for any contents related to each structure] 
        shall be made available with respect to any single such 
        building, up to an aggregate liability (including such 
        limits specified in subparagraph (B) or (C) of 
        paragraph (1), as applicable) of $500,000, and coverage 
        shall be made available up to a total of $500,000 
        aggregate liability for contents owned by the building 
        owner and $500,000 aggregate liability for each unit 
        within the building for contents owned by the tenant; 
        [and]
          (5) the Administrator may provide that, in the case 
        of any residential property, each renewal or new 
        contract for flood insurance coverage may provide not 
        more than $5,000 aggregate liability per dwelling unit 
        for any necessary increases in living expenses incurred 
        by the insured when losses from a flood make the 
        residence unfit to live in, except that--
                  (A) purchase of such coverage shall be at the 
                option of the insured;
                  (B) any such coverage shall be made available 
                only at chargeable rates that are not less than 
                the estimated premium rates for such coverage 
                determined in accordance with section 
                1307(a)(1); and
                  (C) the Administrator may make such coverage 
                available only if the Administrator makes a 
                determination and causes notice of such 
                determination to be published in the Federal 
                Register that--
                          (i) a competitive private insurance 
                        market for such coverage does not 
                        exist; and
                          (ii) the national flood insurance 
                        program has the capacity to make such 
                        coverage available without borrowing 
                        funds from the Secretary of the 
                        Treasury under section 1309 or 
                        otherwise;
          (6) the Administrator may provide that, in the case 
        of any commercial property or other residential 
        property, including multifamily rental property, 
        coverage for losses resulting from any partial or total 
        interruption of the insured's business caused by damage 
        to, or loss of, such property from a flood may be made 
        available to every insured upon renewal and every 
        applicant, up to a total amount of $20,000 per 
        property, except that--
                  (A) purchase of such coverage shall be at the 
                option of the insured;
                  (B) any such coverage shall be made available 
                only at chargeable rates that are not less than 
                the estimated premium rates for such coverage 
                determined in accordance with section 
                1307(a)(1); and
                  (C) the Administrator may make such coverage 
                available only if the Administrator makes a 
                determination and causes notice of such 
                determination to be published in the Federal 
                Register that--
                          (i) a competitive private insurance 
                        market for such coverage does not 
                        exist; and
                          (ii) the national flood insurance 
                        program has the capacity to make such 
                        coverage available without borrowing 
                        funds from the Secretary of the 
                        Treasury under section 1309 or 
                        otherwise;
          [(5)] (7) any flood insurance coverage which may be 
        made available in excess of the limits specified in 
        subparagraph (A), (B), or (C) of paragraph (1), shall 
        be based only on chargeable premium rates under section 
        1308 which are not less than the estimated premium 
        rates under section 1307(a)(1), and the amount of such 
        excess coverage shall not in any case exceed an amount 
        equal to the applicable limit so specified (or 
        allocated) under paragraph (1)(C), (2), (3), or (4), as 
        applicable[.]; and
          (8) each of the dollar amount limitations under 
        paragraphs (2), (3), (4), (5), and (6) shall be 
        adjusted effective on the date of the enactment of the 
        Flood Insurance Reform Act of 2012, such adjustments 
        shall be calculated using the percentage change, over 
        the period beginning on September 30, 1994, and ending 
        on such date of enactment, in such inflationary index 
        as the Administrator shall, by regulation, specify, and 
        the dollar amount of such adjustment shall be rounded 
        to the next lower dollar; and the Administrator shall 
        cause to be published in the Federal Register the 
        adjustments under this paragraph to such dollar amount 
        limitations; except that in the case of coverage for a 
        property that is made available, pursuant to this 
        paragraph, in an amount that exceeds the limitation 
        otherwise applicable to such coverage as specified in 
        paragraph (2), (3), (4), (5), or (6), the total of such 
        coverage shall be made available only at chargeable 
        rates that are not less than the estimated premium 
        rates for such coverage determined in accordance with 
        section 1307(a)(1).
  (c) Effective Date of Policies.--
          (1) Waiting period.--Except as provided in paragraph 
        (2), coverage under a new contract for flood insurance 
        coverage under this title entered into after the date 
        of enactment of the Riegle Community Development and 
        Regulatory Improvement Act of 1994, and any 
        modification to coverage under an existing flood 
        insurance contract made after such date, shall become 
        effective upon the expiration of the 30-day period 
        beginning on the date that all obligations for such 
        coverage (including completion of the application and 
        payment of any initial premiums owed) are 
        satisfactorily completed. With respect to any flood 
        that has commenced or is in progress before the 
        expiration of such 30-day period, such flood insurance 
        coverage for a property shall take effect upon the 
        expiration of such 30-day period and shall cover damage 
        to such property occurring after the expiration of such 
        period that results from such flood, but only if the 
        property has not suffered damage or loss as a result of 
        such flood before the expiration of such 30-day period.

           *       *       *       *       *       *       *

  (d) Payment of Premiums in Installments for Residential 
Properties.--
          (1) Authority.--In addition to any other terms and 
        conditions under subsection (a), such regulations shall 
        provide that, in the case of any residential property, 
        premiums for flood insurance coverage made available 
        under this title for such property may be paid in 
        installments.
          (2) Limitations.--In implementing the authority under 
        paragraph (1), the Administrator may establish 
        increased chargeable premium rates and surcharges, and 
        deny coverage and establish such other sanctions, as 
        the Administrator considers necessary to ensure that 
        insureds purchase, pay for, and maintain coverage for 
        the full term of a contract for flood insurance 
        coverage or to prevent insureds from purchasing 
        coverage only for periods during a year when risk of 
        flooding is comparatively higher or canceling coverage 
        for periods when such risk is comparatively lower.

                       ESTIMATES OF PREMIUM RATES

  Sec. 1307. (a) The [Director] Administrator is authorized to 
undertake and carry out such studies and investigations and 
receive or exchange such information as may be necessary to 
estimate, and shall from time to time estimate, on an area, 
subdivision, or other appropriate basis--
          (1) * * *

           *       *       *       *       *       *       *

  (b) In carrying out subsection (a), the [Director] 
Administrator shall, to the maximum extent feasible and on a 
reimbursable basis, utilize the services of the Department of 
the Army, the Department of the Interior, The Department of 
Agriculture, the Department of Commerce, and the Tennessee 
Valley Authority, and, as appropriate, other Federal 
departments or agencies, and for such purposes may enter into 
agreements or other appropriate arrangements with any persons.
  (c) The [Director] Administrator shall give priority to 
conducting studies and investigations and making estimates 
under this section in those States or areas (or subdivisions 
thereof) which he has determined have evidenced a positive 
interest in securing flood insurance coverage under the flood 
insurance program.
  (d) Notwithstanding any other provision of law, any structure 
existing on the date of enactment of the Flood Disaster 
Protection Act of 1973 and located within Avoyelles, 
Evangeline, Rapides, or Saint Landry Parish in the State of 
Louisiana, which the [Director] Administrator determines is 
subject to additional flood hazards as a result of the 
construction or operation of the Atchafalaya Basin Levee 
System, shall be eligible for flood insurance under this title 
(if and to the extent it is eligible for such insurance under 
the other provisions of this title) at premium rates that shall 
not exceed those which would be applicable if such additional 
hazards did not exist.
  (e) Notwithstanding any other provision of law, any community 
that has made adequate progress, acceptable to the [Director] 
Administrator, on the [construction of a flood protection 
system] construction, reconstruction, or improvement of a flood 
protection system (without respect to the level of Federal 
investment or participation) which will afford flood protection 
for the one-hundred-year frequency flood as determined by the 
[Director] Administrator, shall be eligible for flood insurance 
under this title (if and to the extent it is eligible for such 
insurance under the other provisions of this title) at premium 
rates not exceeding those which would be applicable under this 
section if such flood protection system had been completed. The 
[Director] Administrator shall find that adequate progress on 
the [construction of a flood protection system] construction, 
reconstruction, or improvement of a flood protection system as 
required herein has been only if (1) 100 percent of the project 
cost of the system has been authorized, (2) at least 60 percent 
of the project cost of the system has been appropriated, (3) at 
least 50 percent of the project cost of the system has been 
expended based on the present value of the completed system, 
and (4) the system is at least 50 percent completed.
  (f) Notwithstanding any other provision of law, this 
subsection shall only apply in a community which has been 
determined by the [Director] Administrator of the Federal 
Emergency Management Agency to be in the process of restoring 
flood protection afforded by a flood protection system that had 
been previously accredited on a Flood Insurance Rate Map as 
providing 100-year frequency flood protection but no longer 
does so (without respect to the level of Federal investment or 
participation). Except as provided in this subsection, in such 
a community, flood insurance shall be made available to those 
properties impacted by the disaccreditation of the flood 
protection system at premium rates that do not exceed those 
which would be applicable to any property located in an area of 
special flood hazard, the construction of which was started 
prior to the effective date of the initial Flood Insurance Rate 
Map published by the [Director] Administrator for the community 
in which such property is located. A revised Flood Insurance 
Rate Map shall be prepared for the community to delineate as 
Zone AR the areas of special flood hazard, whether coastal or 
riverine, that result from the disaccreditation of the flood 
protection system. A community will be considered to be in the 
process of restoration if--
          (1) the flood protection system has been deemed 
        restorable by [a Federal agency in consultation with 
        the local project sponsor] the entity or entities that 
        own, operate, maintain, or repair such system;

           *       *       *       *       *       *       *

Communities that the [Director] Administrator of the Federal 
Emergency Management Agency determines to meet the criteria set 
forth in paragraphs (1) and (2) as of January 1, 1992, shall 
not be subject to revised Flood Insurance Rate Maps that 
contravene the intent of this subsection. Such communities 
shall remain eligible for C zone rates for properties located 
in zone AR for any policy written prior to promulgation of 
final regulations for this section. Floodplain management 
criteria for such communities shall not require the elevation 
of improvements to existing structures and shall not exceed 3 
feet above existing grade for new construction, provided the 
base flood elevation based on the disaccredited flood control 
system does not exceed five feet above existing grade, or the 
remaining new construction in such communities is limited to 
infill sites, rehabilitation of existing structures, or 
redevelopment of previously developed areas.
The [Director] Administrator of the Federal Emergency 
Management Agency shall develop and promulgate regulations to 
implement this subsection, including minimum floodplain 
management criteria, within 24 months after the date of 
enactment of this subsection.

               ESTABLISHMENT OF CHARGEABLE PREMIUM RATES

  Sec. 1308. (a) On the basis of estimates made under section 
1307 and such other information as may be necessary, the 
[Director] Administrator shall from time to time, after 
consultation with the advisory committee authorized under 
section 1318, appropriate representatives of the pool formed or 
otherwise created under section 1331, and appropriate 
representatives of the insurance authorities of the respective 
States, prescribe by regulation or notice--
          (1) * * *

           *       *       *       *       *       *       *

  (c) Actuarial Rate Properties.--Subject only to [the 
limitations provided under paragraphs (1) and (2)] subsection 
(e) and subsection (g), the chargeable rate shall not be less 
than the applicable estimated risk premium rate for such area 
(or subdivision thereof) under section 1307(a)(1) with respect 
to the following properties:
          (1) Post-firm properties.--Any property the 
        construction or substantial improvement of which the 
        [Director] Administrator determines has been started 
        after December 31, 1974, or started after the effective 
        date of the initial rate map published by the 
        [Director] Administrator under paragraph (2) of section 
        1360 for the area in which such property is located, 
        whichever is later[, except that the chargeable rate 
        for properties under this paragraph shall be subject to 
        the limitation under subsection (e)].
          (2) Commercial properties.--Any nonresidential 
        property.
          (3) Second homes and vacation homes.--Any residential 
        property that is not the primary residence of any 
        individual.
          (4) Homes sold to new owners.--Any single family 
        property that--
                  (A) has been constructed or substantially 
                improved and for which such construction or 
                improvement was started, as determined by the 
                Administrator, before December 31, 1974, or 
                before the effective date of the initial rate 
                map published by the Administrator under 
                paragraph (2) of section 1360(a) for the area 
                in which such property is located, whichever is 
                later; and
                  (B) is purchased after the effective date of 
                this paragraph, pursuant to section 
                345(c)(3)(A) of the Flood Insurance Reform Act 
                of 2012.
          (5) Homes damaged or improved.--Any property that, on 
        or after the date of the enactment of the Flood 
        Insurance Reform Act of 2012, has experienced or 
        sustained--
                  (A) substantial flood damage exceeding 50 
                percent of the fair market value of such 
                property; or
                  (B) substantial improvement exceeding 30 
                percent of the fair market value of such 
                property.
          (6) Homes with multiple claims.--Any severe 
        repetitive loss property (as such term is defined in 
        section 1366(j)).
          [(2)] (7) Certain leased coastal and river 
        properties.--Any property leased from the Federal 
        Government (including residential and nonresidential 
        properties) that the [Director] Administrator 
        determines is located on the river-facing side of any 
        dike, levee, or other riverine flood control structure, 
        or seaward of any seawall or other coastal flood 
        control structure.
  (d) With respect to any chargeable premium rate prescribed 
under this section, a sum equal to the portion of the rate that 
covers any administrative expenses of carrying out the flood 
insurance and floodplain management programs which have been 
estimated under paragraphs (1)(B)(ii) and (1)(B)(iii) of 
section 1307(a) or paragraph (2) of such section (including the 
fees under such paragraphs), shall be paid to the [Director] 
Administrator. The [Director] Administrator shall deposit the 
sum in the National Flood Insurance Fund established under 
section 1310.
  (e) Annual Limitation on Premium Increases.--Except with 
respect to properties described under [paragraph (2) or (3)] 
paragraph (7) of subsection (c) or subsection (h), and 
notwithstanding any other provision of this title, the 
chargeable risk premium rates for flood insurance under this 
title for any properties within any single risk classification 
may not be increased by an amount that would result in the 
average of such rate increases for properties within the risk 
classification during any 12-month period exceeding [10 
percent] 20 percent of the average of the risk premium rates 
for properties within the risk classification upon the 
commencement of such 12-month period.
  (f) Adjustment of Premium.--Notwithstanding any other 
provision of law, if the [Director] Administrator determines 
that the holder of a flood insurance policy issued under this 
Act is paying a lower premium than is required under this 
section due to an error in the flood plain determination, the 
[Director] Administrator may only prospectively charge the 
higher premium rate.
  (g) 5-Year Phase-In of Flood Insurance Rates for Certain 
Properties in Newly Mapped Areas.--
          (1) 5-year phase-in period.--Notwithstanding 
        subsection (c) or any other provision of law relating 
        to chargeable risk premium rates for flood insurance 
        coverage under this title, in the case of any area that 
        was not previously designated as an area having special 
        flood hazards and that, pursuant to any issuance, 
        revision, updating, or other change in flood insurance 
        maps, becomes designated as such an area, during the 5-
        year period that begins, except as provided in 
        paragraph (2), upon the date that such maps, as issued, 
        revised, updated, or otherwise changed, become 
        effective, the chargeable premium rate for flood 
        insurance under this title with respect to any covered 
        property that is located within such area shall be the 
        rate described in paragraph (3).
          (2) Applicability to preferred risk rate areas.--In 
        the case of any area described in paragraph (1) that 
        consists of or includes an area that, as of date of the 
        effectiveness of the flood insurance maps for such area 
        referred to in paragraph (1) as so issued, revised, 
        updated, or changed, is eligible for any reason for 
        preferred risk rate method premiums for flood insurance 
        coverage and was eligible for such premiums as of the 
        enactment of the Flood Insurance Reform Act of 2012, 
        the 5-year period referred to in paragraph (1) for such 
        area eligible for preferred risk rate method premiums 
        shall begin upon the expiration of the period during 
        which such area is eligible for such preferred risk 
        rate method premiums.
          (3) Phase-in of full actuarial rates.--With respect 
        to any area described in paragraph (1), the chargeable 
        risk premium rate for flood insurance under this title 
        for a covered property that is located in such area 
        shall be--
                  (A) for the first year of the 5-year period 
                referred to in paragraph (1), the greater of--
                          (i) 20 percent of the chargeable risk 
                        premium rate otherwise applicable under 
                        this title to the property; and
                          (ii) in the case of any property 
                        that, as of the beginning of such first 
                        year, is eligible for preferred risk 
                        rate method premiums for flood 
                        insurance coverage, such preferred risk 
                        rate method premium for the property;
                  (B) for the second year of such 5-year 
                period, 40 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property;
                  (C) for the third year of such 5-year period, 
                60 percent of the chargeable risk premium rate 
                otherwise applicable under this title to the 
                property;
                  (D) for the fourth year of such 5-year 
                period, 80 percent of the chargeable risk 
                premium rate otherwise applicable under this 
                title to the property; and
                  (E) for the fifth year of such 5-year period, 
                100 percent of the chargeable risk premium rate 
                otherwise applicable under this title to the 
                property.
          (4) Covered properties.--For purposes of the 
        subsection, the term ``covered property'' means any 
        residential property occupied by its owner or a bona 
        fide tenant as a primary residence.
  (h) Prohibition of Extension of Subsidized Rates to Lapsed 
Policies.--Notwithstanding any other provision of law relating 
to chargeable risk premium rates for flood insurance coverage 
under this title, the Administrator shall not provide flood 
insurance coverage under this title for any property for which 
a policy for such coverage for the property has previously 
lapsed in coverage as a result of the deliberate choice of the 
holder of such policy, at a rate less than the applicable 
estimated risk premium rates for the area (or subdivision 
thereof) in which such property is located.

SEC. 1308A. NOTIFICATION TO TENANTS OF AVAILABILITY OF CONTENTS 
                    INSURANCE.

  (a) In General.--The Administrator shall, upon entering into 
a contract for flood insurance coverage under this title for 
any property--
          (1) provide to the insured sufficient copies of the 
        notice developed pursuant to subsection (b); and
          (2) require the insured to provide a copy of the 
        notice, or otherwise provide notification of the 
        information under subsection (b) in the manner that the 
        manager or landlord deems most appropriate, to each 
        such tenant and to each new tenant upon commencement of 
        such a tenancy.
  (b) Notice.--Notice to a tenant of a property in accordance 
with this subsection is written notice that clearly informs a 
tenant--
          (1) whether the property is located in an area having 
        special flood hazards;
          (2) that flood insurance coverage is available under 
        the national flood insurance program under this title 
        for contents of the unit or structure leased by the 
        tenant;
          (3) of the maximum amount of such coverage for 
        contents available under this title at that time; and
          (4) of where to obtain information regarding how to 
        obtain such coverage, including a telephone number, 
        mailing address, and Internet site of the Administrator 
        where such information is available.

                               FINANCING

  Sec. 1309. (a) All authority which was vested in the Housing 
and Home Finance Administrator by virtue of section 15(e) of 
the Federal Flood Insurance Act of 1956 (70 Stat. 1084) 
(pertaining to the issue of notes or other obligations or the 
Secretary of the Treasury), as amended by subsections (a) and 
(b) of section 1303 of this Act, shall be available to the 
[Director] Administrator for the purpose of carrying out the 
flood insurance program under this title; except that the total 
amount of notes and obligations which may be issued by the 
[Director] Administrator pursuant to such authority (1) without 
the approval of the President, may not exceed $500,000,000, and 
(2) with the approval of the President, may not exceed 
$1,500,000,000 through the date specified in section 1319, and 
$1,000,000,000 thereafter; except that, through [the earlier of 
the date of the enactment into law of an Act that specifically 
amends the date specified in this section or May 31, 2012] 
September 30, 2016, clause (2) of this sentence shall be 
applied by substituting ``$20,725,000,000'' for 
``$1,500,000,000''. The [Director] Administrator shall report 
to the Committee on Banking, Finance and Urban Affairs of the 
House of Representatives and the Committee on Banking, Housing, 
and Urban Affairs of the Senate at any time when he requests 
the approval of the President in accordance with the preceding 
sentence.
  (b) Any funds borrowed by the [Director] Administrator under 
this authority shall, from time to time, be deposited in the 
National Flood Insurance Fund established under section 1310.

                     NATIONAL FLOOD INSURANCE FUND

  Sec. 1310. (a) To carry out the flood insurance program 
authorized by this title, the [Director] Administrator shall 
establish in the Treasury of the United States a National Flood 
Insurance Fund (hereinafter referred to as the ``fund'') which 
shall be an account separate from any other accounts or funds 
available to the [Director] Administrator and shall be 
available as described in subsection (f), without fiscal year 
limitation (except as otherwise provided in this section)--
          (1) * * *

           *       *       *       *       *       *       *

          (6) for carrying out the program under section 
        1315(b);
          (7) for transfers to the National Flood Mitigation 
        Fund, but only to the extent provided in section 
        1367(b)(1)[;]; and
          [(8) for financial assistance under section 1361A to 
        States and communities for taking actions under such 
        section with respect to severe repetitive loss 
        properties, but only to the extent provided in section 
        1361A(i); and
          [(9) for funding, not to exceed $10,000,000 in any 
        fiscal year, for mitigation actions under section 1323, 
        except that, notwithstanding any other provision of 
        this title, amounts made available pursuant to this 
        paragraph shall not be subject to offsetting 
        collections through premium rates for flood insurance 
        coverage under this title.]
          (8) for transfers to the National Flood Insurance 
        Reserve Fund under section 1310A, in accordance with 
        such section.
  (b) The fund shall be credited with--
          (1) * * *

           *       *       *       *       *       *       *

          (5) such sums as are required to be paid to the 
        [Director] Administrator under section 1308(d); and

           *       *       *       *       *       *       *

  (c) If, after--
          (1) * * *

           *       *       *       *       *       *       *

the [Director] Administrator determines that the moneys of the 
fund are in excess of current needs, he may request the 
investment of such amounts as he deems advisable by the 
Secretary of the Treasury in obligations issued or guaranteed 
by the United States.
  (d) In the event the [Director] Administrator makes a 
determination in accordance with the provisions of section 1340 
that operation of the flood insurance program, in whole or in 
part, should be carried out through the facilities of the 
Federal Government, the fund shall be available for all 
purposes incident thereto, including--
          (1) * * *

           *       *       *       *       *       *       *

for so long as the program is so carried out, and in such event 
any premiums paid shall be deposited by the [Director] 
Administrator to the credit of the fund.

           *       *       *       *       *       *       *


SEC. 1310A. RESERVE FUND.

  (a) Establishment of Reserve Fund.--In carrying out the flood 
insurance program authorized by this title, the Administrator 
shall establish in the Treasury of the United States a National 
Flood Insurance Reserve Fund (in this section referred to as 
the ``Reserve Fund'') which shall--
          (1) be an account separate from any other accounts or 
        funds available to the Administrator; and
          (2) be available for meeting the expected future 
        obligations of the flood insurance program.
  (b) Reserve Ratio.--Subject to the phase-in requirements 
under subsection (d), the Reserve Fund shall maintain a balance 
equal to--
          (1) 1 percent of the sum of the total potential loss 
        exposure of all outstanding flood insurance policies in 
        force in the prior fiscal year; or
          (2) such higher percentage as the Administrator 
        determines to be appropriate, taking into consideration 
        any circumstance that may raise a significant risk of 
        substantial future losses to the Reserve Fund.
  (c) Maintenance of Reserve Ratio.--
          (1) In general.--The Administrator shall have the 
        authority to establish, increase, or decrease the 
        amount of aggregate annual insurance premiums to be 
        collected for any fiscal year necessary--
                  (A) to maintain the reserve ratio required 
                under subsection (b); and
                  (B) to achieve such reserve ratio, if the 
                actual balance of such reserve is below the 
                amount required under subsection (b).
          (2) Considerations.--In exercising the authority 
        under paragraph (1), the Administrator shall consider--
                  (A) the expected operating expenses of the 
                Reserve Fund;
                  (B) the insurance loss expenditures under the 
                flood insurance program;
                  (C) any investment income generated under the 
                flood insurance program; and
                  (D) any other factor that the Administrator 
                determines appropriate.
          (3) Limitations.--In exercising the authority under 
        paragraph (1), the Administrator shall be subject to 
        all other provisions of this Act, including any 
        provisions relating to chargeable premium rates and 
        annual increases of such rates.
  (d) Phase-in Requirements.--The phase-in requirements under 
this subsection are as follows:
          (1) In general.--Beginning in fiscal year 2012 and 
        not ending until the fiscal year in which the ratio 
        required under subsection (b) is achieved, in each such 
        fiscal year the Administrator shall place in the 
        Reserve Fund an amount equal to not less than 7.5 
        percent of the reserve ratio required under subsection 
        (b).
          (2) Amount satisfied.--As soon as the ratio required 
        under subsection (b) is achieved, and except as 
        provided in paragraph (3), the Administrator shall not 
        be required to set aside any amounts for the Reserve 
        Fund.
          (3) Exception.--If at any time after the ratio 
        required under subsection (b) is achieved, the Reserve 
        Fund falls below the required ratio under subsection 
        (b), the Administrator shall place in the Reserve Fund 
        for that fiscal year an amount equal to not less than 
        7.5 percent of the reserve ratio required under 
        subsection (b).
  (e) Limitation on Reserve Ratio.--In any given fiscal year, 
if the Administrator determines that the reserve ratio required 
under subsection (b) cannot be achieved, the Administrator 
shall submit a report to the Congress that--
          (1) describes and details the specific concerns of 
        the Administrator regarding such consequences;
          (2) demonstrates how such consequences would harm the 
        long-term financial soundness of the flood insurance 
        program; and
          (3) indicates the maximum attainable reserve ratio 
        for that particular fiscal year.
  (f) Availability of Amounts.--The reserve ratio requirements 
under subsection (b) and the phase-in requirements under 
subsection (d) shall be subject to the availability of amounts 
in the National Flood Insurance Fund for transfer under section 
1310(a)(10), as provided in section 1310(f).

                     OPERATING COSTS AND ALLOWANCES

  Sec. 1311. (a) The [Director] Administrator shall from time 
to time negotiate with appropriate representatives of the 
insurance industry for the purpose of establishing--
          (1) * * *

           *       *       *       *       *       *       *

  (b) For purposes of subsection (a)--
          (1) the term ``operating costs'' shall (without 
        limiting such term) include--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) other direct, actual, and necessary 
                expenses which the [Director] Administrator 
                finds are incurred in connection with selling 
                or servicing flood insurance coverage; and
          (2) the term ``operating allowances'' shall (without 
        limiting such term) include amounts for profit and 
        contingencies which the [Director] Administrator finds 
        reasonable and necessary to carry out the purposes of 
        this title.

                           PAYMENT OF CLAIMS

  Sec. 1312. [The Director is] (a) In General.--The 
Administrator is authorized to prescribe regulations 
establishing the general method or methods by which proved and 
approved claims for losses may be adjusted and paid for any 
damage to or loss of property which is covered by flood 
insurance made available under the provisions of this title.
  (b) Minimum Annual Deductibles.--
          (1) Subsidized rate properties.--For any structure 
        that is covered by flood insurance under this title, 
        and for which the chargeable rate for such coverage is 
        less than the applicable estimated risk premium rate 
        under section 1307(a)(1) for the area (or subdivision 
        thereof) in which such structure is located, the 
        minimum annual deductible for damage to or loss of such 
        structure shall be $2,000.
          (2) Actuarial rate properties.--For any structure 
        that is covered by flood insurance under this title, 
        for which the chargeable rate for such coverage is not 
        less than the applicable estimated risk premium rate 
        under section 1307(a)(1) for the area (or subdivision 
        thereof) in which such structure is located, the 
        minimum annual deductible for damage to or loss of such 
        structure shall be $1,000.

              DISSEMINATION OF FLOOD INSURANCE INFORMATION

  Sec. 1313. The [Director] Administrator shall from time to 
time take such action as may be necessary in order to make 
information and data available to the public, and to any State 
or local agency or official, with regard to--
          (1) * * *

           *       *       *       *       *       *       *


                   STATE AND LOCAL LAND USE CONTROLS

  Sec. 1315. (a) Requirement for Participation in Flood 
Insurance Program.--
          (1) In general.--After December 31, 1971, no new 
        flood insurance coverage shall be provided under this 
        title in any area (or subdivision thereof) unless an 
        appropriate public body shall have adopted adequate 
        land use and control measures (with effective 
        enforcement provisions) which the [Director] 
        Administrator finds are consistent with the 
        comprehensive criteria for land management and use 
        under section 1361.
          (2) Agricultural structures.--
                  (A) * * *
                  (B) Premium rates and coverage.--To the 
                extent applicable, an agricultural structure 
                repaired or restored pursuant to subparagraph 
                (A) shall pay chargeable premium rates 
                established under section 1308 at the estimated 
                risk premium rates under section 1307(a)(1). If 
                resources are available, the [Director] 
                Administrator shall provide technical 
                assistance and counseling, upon request of the 
                owner of the structure, regarding wet flood-
                proofing and other flood damage reduction 
                measures for agricultural structures. The 
                [Director] Administrator shall not be required 
                to make flood insurance coverage available for 
                such an agricultural structure unless the 
                structure is wet flood-proofed through 
                permanent or contingent measures applied to the 
                structure or its contents that prevent or 
                provide resistance to damage from flooding by 
                allowing flood waters to pass through the 
                structure, as determined by the [Director] 
                Administrator.
                  (C) Prohibition on disaster relief.--
                Notwithstanding any other provision of law, any 
                agricultural structure repaired or restored 
                pursuant to subparagraph (A) shall not be 
                eligible for disaster relief assistance under 
                any program administered by the [Director] 
                Administrator or any other Federal agency.

           *       *       *       *       *       *       *

  (b) Community Rating System and Incentives for Community 
Floodplain Management.--
          (1) Authority and goals.--The [Director] 
        Administrator shall carry out a community rating system 
        program, under which communities participate 
        voluntarily--
                  (A) * * *

           *       *       *       *       *       *       *

          (2) Incentives.--The program shall provide incentives 
        in the form of credits on premium rates for flood 
        insurance coverage in communities that the [Director] 
        Administrator determines have adopted and enforced 
        measures that reduce the risk of flood and erosion 
        damage that exceed the criteria set forth in section 
        1361. In providing incentives under this paragraph, the 
        [Director] Administrator may provide for credits to 
        flood insurance premium rates in communities that the 
        [Director] Administrator determines have implemented 
        measures that protect natural and beneficial floodplain 
        functions.
          (3) Credits.--The credits on premium rates for flood 
        insurance coverage shall be based on the estimated 
        reduction in flood and erosion damage risks resulting 
        from the measures adopted by the community under this 
        program. If a community has received mitigation 
        assistance under section 1366, the credits shall be 
        phased in a manner, determined by the [Director] 
        Administrator, to recover the amount of such assistance 
        provided for the community.
          (4) Reports.--Not later than 2 years after the date 
        of enactment of the Riegle Community Development and 
        Regulatory Improvement Act of 1994 and not less than 
        every 2 years thereafter, the [Director] Administrator 
        shall submit a report to the Congress regarding the 
        program under this subsection. Each report shall 
        include an analysis of the cost-effectiveness of the 
        program, any other accomplishments or shortcomings of 
        the program, and any recommendations of the [Director] 
        Administrator for legislation regarding the program.

             PROPERTIES IN VIOLATION OF STATE AND LOCAL LAW

  Sec. 1316. No new flood insurance coverage shall be provided 
under this title for any property which the [Director] 
Administrator finds has been declared by a duly constituted 
State or local zoning authority, or other authorized public 
body, to be in violation of State or local laws, regulations or 
ordinances which are intended to discourage or otherwise 
restrict land development or occupancy in flood-prone areas.

                    COORDINATION WITH OTHER PROGRAMS

  Sec. 1317. In carrying out this title, the [Director] 
Administrator shall consult with other departments and agencies 
of the Federal Government, and with interstate, State, and 
local agencies having responsibilities for flood control, flood 
forecasting, or flood damage prevention, in order to assure 
that the programs of such agencies and the flood insurance 
program authorized under this title are mutually consistent.

                           ADVISORY COMMITTEE

  Sec. 1318. (a) The [Director] Administrator shall appoint a 
flood insurance advisory committee without regard to the 
provisions of title 5, United States Code, governing 
appointments in the competitive service, and such committee 
shall advise the [Director] Administrator in the preparation of 
any regulations prescribed in accordance with this title and 
with respect to policy matters arising in the administration of 
this title, and shall perform such other responsibilities as 
the [Director] Administrator may, from time to time, assign to 
such committee.

           *       *       *       *       *       *       *

  (c) Members of the committee shall, while attending 
conferences or meetings thereof, be entitled to receive 
compensation at a rate fixed by the [Director] Administrator 
but not exceeding $100 per day, including traveltime, and while 
so serving away from their homes or regular places of business 
they may be allowed travel expenses, including per diem in lieu 
of subsistence, as is authorized under section 5703 of title 5, 
United States Code, for persons in the Government service 
employed intermittently.

                           PROGRAM EXPIRATION

  Sec. 1319. No new contract for flood insurance under this 
title shall be entered into after [the earlier of the date of 
the enactment into law of an Act that specifically amends the 
date specified in this section or May 31, 2012] September 30, 
2016.

          [REPORT TO THE PRESIDENT] ANNUAL REPORT TO CONGRESS

  Sec. 1320. (a) In General.--The [Director] Administrator 
shall [biennially] submit a report of operations under this 
title to [the President for submission to] the Congress not 
later than June 30 of each year.
  (b) Effects of Flood Insurance Program.--The [Director] 
Administrator shall include, as part of the [biennial] annual 
report submitted under subsection (a), a chapter reporting on 
the effects on the flood insurance program observed through 
implementation of requirements under the Riegle Community 
Development and Regulatory Improvement Act of 1994.
  (c) Financial Status of Program.--The report under this 
section for each year shall include information regarding the 
financial status of the national flood insurance program under 
this title, including a description of the financial status of 
the National Flood Insurance Fund and current and projected 
levels of claims, premium receipts, expenses, and borrowing 
under the program.

           *       *       *       *       *       *       *


[SEC. 1323. GRANTS FOR REPETITIVE INSURANCE CLAIMS PROPERTIES.

  [(a) In General.--The Director may provide funding for 
mitigation actions that reduce flood damages to individual 
properties for which 1 or more claim payments for losses have 
been made under flood insurance coverage under this title, but 
only if the Director determines that--
          [(1) such activities are in the best interest of the 
        National Flood Insurance Fund; and
          [(2) such activities cannot be funded under the 
        program under section 1366 because--
                  [(A) the requirements of section 1366(g) are 
                not being met by the State or community in 
                which the property is located; or
                  [(B) the State or community does not have the 
                capacity to manage such activities.
  [(b) Priority for Worst-Case Properties.--In determining the 
properties for which funding is to be provided under this 
section, the Director shall consult with the States in which 
such properties are located and provide assistance for 
properties in the order that will result in the greatest amount 
of savings to the National Flood Insurance Fund in the shortest 
period of time.]

           *       *       *       *       *       *       *


SEC. 1325. TREATMENT OF SWIMMING POOL ENCLOSURES OUTSIDE OF HURRICANE 
                    SEASON.

  In the case of any property that is otherwise in compliance 
with the coverage and building requirements of the national 
flood insurance program, the presence of an enclosed swimming 
pool located at ground level or in the space below the lowest 
floor of a building after November 30 and before June 1 of any 
year shall have no effect on the terms of coverage or the 
ability to receive coverage for such building under the 
national flood insurance program established pursuant to this 
title, if the pool is enclosed with non-supporting breakaway 
walls.

  CHAPTER II--ORGANIZATION AND ADMINISTRATION OF THE FLOOD INSURANCE 
                                PROGRAM

                    ORGANIZATION AND ADMINISTRATION

  Sec. 1330. Following such consultation with representatives 
of the insurance industry as may be necessary, the [Director] 
Administrator shall implement the flood insurance program 
authorized under chapter I in accordance with the provision of 
part A of this chapter and, if a determination is made by him 
under section 1340, under part B of this chapter.

       Part A--Industry Program With Federal Financial Assistance

                     INDUSTRY FLOOD INSURANCE POOL

  Sec. 1331. (a) The [Director] Administrator is authorized to 
encourage and otherwise assist any insurance companies and 
other insurers which meet the requirements prescribed under 
subsection (b) to form, as associate, or otherwise join 
together in a pool--
          (1) * * *
          (2) for the purpose of assuming, including as 
        reinsurance of insurance coverage provided by the flood 
        insurance program, on such terms and conditions as may 
        be agreed upon, such financial responsibility as will 
        enable such companies and other insurers, with the 
        Federal financial and other assistance available under 
        this title, to assure a reasonable proportion of 
        responsibility for the adjustment and payment of claims 
        for losses under the flood insurance program.
  (b) In order to promote the effective administration of the 
flood insurance program under this part, and to assure that the 
objectives of this title are furthered, the [Director] 
Administrator is authorized to prescribe appropriate 
requirements for insurance companies and other insurers 
participating in such pool including, but not limited to, 
minimum requirements for capital or surplus or assets.

                  AGREEMENTS WITH FLOOD INSURANCE POOL

  Sec. 1332. (a) The [Director] Administrator is authorized to 
enter into such agreements with the pool formed or otherwise 
created under this part as he deems necessary to carry out the 
purposes of this title.
  (b) Such agreements shall specify--
          (1) * * *

           *       *       *       *       *       *       *

          (3) the maximum amount of profit, established by the 
        [Director] Administrator and set forth in the schedules 
        prescribed under section 1311, which may be realized by 
        such pool (and the companies and other insurers 
        participating therein),

           *       *       *       *       *       *       *

  (c) In addition, such agreements shall contain such 
provisions as the [Director] Administrator finds necessary to 
assure that--
          (1) * * *
          (2) the insurance companies and other insurers 
        participating in the pool will take whatever action may 
        be necessary to provide continuity of flood insurance 
        coverage or reinsurance by the pool, and

           *       *       *       *       *       *       *


                     PREMIUM EQUALIZATION PAYMENTS

  Sec. 1334. (a) The [Director] Administrator, on such terms 
and conditions as he may from time to time prescribe, shall 
make periodic payments to the pool formed or otherwise created 
under section 1331, in recognition of such reductions in 
chargeable premium rates under section 1308 below estimated 
premium rates under section 1307(a)(1) as are required in order 
to make flood insurance available on reasonable terms and 
conditions.
  (b) Designated periods under this section and the methods for 
determining the sum of premiums paid or payable during such 
periods shall be established by the [Director] Administrator.

                          REINSURANCE COVERAGE

  Sec. 1335. (a)(1) The [Director] Administrator is authorized 
to take such action as may be necessary in order to make 
available, to the pool formed or otherwise created under 
section 1331, reinsurance for losses (due to claims for proved 
and approved losses covered by flood insurance) which are in 
excess of losses assumed by such pool in accordance with the 
excess loss agreement entered into under subsection (c).
  (2) The Administrator is authorized to secure reinsurance 
coverage of coverage provided by the flood insurance program 
from private market insurance, reinsurance, and capital market 
sources at rates and on terms determined by the Administrator 
to be reasonable and appropriate in an amount sufficient to 
maintain the ability of the program to pay claims and that 
minimizes the likelihood that the program will utilize the 
borrowing authority provided under section 1309.
  (b) Such reinsurance shall be made available pursuant to 
contract, agreement, or any other arrangement, in consideration 
of such payment of a premium, fee, or other charge as the 
[Director] Administrator finds necessary to cover anticipated 
losses and other costs of providing such reinsurance.
  (c) The [Director] Administrator is authoried to negotiate an 
excess loss agreement, from time to time, under which the 
amount of flood insurance retained by the pool, after ceding 
reinsurance, shall be adequate to further the purposes of this 
title, consistent with the objective of maintaining appropriate 
financial participation and risk sharing to the maximum extent 
practicable on the part of participating insurance companies 
and other insurers.
  (d) All reinsurance claims for losses in excess of losses 
assumed by the pool shall be submitted on a portfolio basis by 
such pool in accordance with terms and conditions established 
by the [Director] Administrator.

                  EMERGENCY IMPLEMENTATION OF PROGRAM

  Sec. 1336. (a) Notwithstanding any other provisions of this 
title, for the purpose of providing flood insurance coverage at 
the earliest possible time, the [Director] Administrator shall 
carry out the flood insurance program authorized under chapter 
I during the period ending on the date specified in section 
1319, in accordance with the provisions of this part and the 
other provision of this title insofar as they relate to this 
part but subject to the modifications made by or under 
subsection (b).
  (b) In carrying out the flood insurance program pursuant to 
subsection (a), the [Director] Administrator--
          (1) * * *

           *       *       *       *       *       *       *


          Part B--Government Program With Industry Assistance

                    FEDERAL OPERATION OF THE PROGRAM

  Sec. 1340. (a) If at any time, after consultation with 
representatives of the insurance industry, the [Director] 
Administrator determines that operation of the flood insurance 
program as provided under part A cannot be carried out, or that 
such operation, in itself, would be assisted materially by the 
Federal Government's assumption, in whole or in part, of the 
operational responsibility for flood insurance under this title 
(on a temporary or other basis) he shall promptly undertake any 
necessary arrangements to carry out the program of flood 
insurance authorized under chapter I through the facilities of 
the Federal Government, utilizing, for purposes of providing 
flood insurance coverage, either--
          (1) * * *
          (2) such other officers and employees of any 
        executive agency (as defined in section 105 of title 5 
        of the United States Code) as the [Director] 
        Administrator and the head of any such agency may from 
        time to time, agree upon, on a reimbursement or other 
        basis, or

           *       *       *       *       *       *       *

  (b) Upon making the determination referred to in subsection 
(a), the [Director] Administrator shall make a report to the 
Congress and, at the same time, to the private insurance 
companies participating in the National Flood Insurance Program 
pursuant to section 1310 of this Act. Such report shall--
          (1) * * *

           *       *       *       *       *       *       *

          (4) contain such recommendations as the