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House legislation would launch FDIC investigation

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The U.S. House of Representatives passed a bill in recent days that would allow authorities to study the causes of high level bank failures and to determine whether "overzealous" Federal Deposit Insurance Corp. regulatory actions are stifling economic activity by constricting bank lending. "No one wants regulators to allow unsafe practices, but no one wants regulators to stifle a potential economic recovery by applying regulatory standards in ways that needlessly inhibit bank lending," said House Financial Services Committee chairman Spencer Bachus (R-Ala.) The legislation, H.R. 2056, assigns the Inspector General of the FDIC the role of studying recent bank failures. Bachus points out in a press statement that 140 banks failed in 2009 and 157 failed last year alone. The bill lacks similar legislation in the Senate. "The rash of bank failures has led some to question whether the FDIC's procedures for resolving troubled banks are appropriate in light of current economic conditions and whether these procedures have been consistently applied in the wake of the financial crisis," Bachus said. The legislation also assigns the Government Accountability Office the tasks of studying the increase in bank failures and the impact on fair value accounting standards, according to a House Financial Services Committee statement on the issue. Write to Kerri Panchuk.

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