[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 660 Introduced in House (IH)]
103d CONGRESS
1st Session
H. R. 660
To facilitate the providing of loan capital to small business concerns,
and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 27, 1993
Mr. LaFalce (for himself, Mr. Smith of Iowa, Mr. Mazzoli, and Mr. Mann)
introduced the following bill; which was referred to the Committee on
Small Business
December 14, 1993
Additional sponsors: Mr. Skelton, Mr. Wyden, Mr. Sisisky, Mr. Conyers,
Mr. Bilbray, Mr. Mfume, Mr. Flake, Mr. Sarpalius, Mr. Poshard, Mr.
Meehan, Ms. Danner, Mr. Strickland, Mr. Tucker, Mr. Klink, Ms. Roybal-
Allard, Mr. Hilliard, Mr. Lancaster, Mr. Franks of Connecticut, Mr. de
Lugo, Mr. Hughes, Mr. Hinchey, Mr. Wilson, Mrs. Clayton, Mr. Hastings,
Mr. Jefferson, Mr. Studds, Mr. Faleomavaega, Mr. Levy, Ms. Slaughter,
Mr. Olver, Ms. Kaptur, Mr. Wynn, Mr. Torres, Mrs. Lloyd, Mr. Goodling,
and Mr. Pastor
_______________________________________________________________________
A BILL
To facilitate the providing of loan capital to small business concerns,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That this Act may be
cited as the ``Small Business Credit Availability Act of 1993''.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress hereby finds that--
(1) secondary mortgage markets have successfully increased
the availability and affordability of long-term residential
mortgages through government sponsored enterprises;
(2) many smaller, innovative businesses could grow more
rapidly, create more jobs, and increase United States
competitiveness in world markets if additional long-term
capital were available to finance purchases of new plant and
equipment;
(3) institutional investors are a major source of long-term
capital for the United States economy, but such investors are
not well equipped to make large numbers of direct loans to
individual business firms;
(4) commercial banks specialize in short-term business
lending and have the facilities and specialized expertise to
evaluate loan applications and to originate and service the
large number of relatively small loans required by smaller
innovative businesses; and
(5) a secondary market for industrial mortgages would link
the loan production ability of commercial lenders with the
long-term investment horizons of pension funds and insurance
companies, thereby increasing the efficiency of United States
capital markets and the amount of long-term capital that is
available to finance purchases of plant and equipment by
smaller innovative businesses.
SEC. 3. STATEMENT OF PURPOSE.
It is the purpose of this Act--
(1) to establish a corporation chartered by the Federal
Government as a government sponsored enterprise whose function
would be to purchase or guarantee loans and facilitate their
packaging into pools for sale to institutional investors;
(2) to authorize the certification of loan poolers by the
corporation;
(3) to provide for a secondary marketing arrangement for
small business loans that meet the underwriting standards of
the Corporation--
(A) to increase the availability of long-term
credit to small businesses at stable interest rates;
(B) to provide greater liquidity and lending
capacity in extending credit to small businesses; and
(C) to provide an arrangement for new lending to
facilitate capital market investments in providing
long-term small business funding, including funds at
fixed rates of interest; and
(4) to enhance the ability of small businesses to obtain
financing by improving the distribution of mortgage financing,
particularly from institutional investors.
SEC. 4. DEFINITIONS.
For the purpose of this Act:
(1) Board.--The term ``Board'' means--
(A) the interim board of directors established in
section 6(a), or
(B) the permanent board of directors established in
section 6(b),
as the case may be.
(2) Certified pooler.--The term ``certified pooler'' means
a secondary marketing loan pooler that is certified under
section 9 of this Act.
(3) Corporation.--The term ``Corporation'' means the
Venture Enhancement and Loan Development Administration for
Smaller Undercapitalized Enterprises (Velda Sue) established in
section 5 of this Act.
(4) Guarantee.--The term ``guarantee'' means the guarantee
of timely payment of the principal and interest on qualified
loans or securities representing interests in, or obligations
backed by, pools of such qualified loans in accordance with
this Act.
(5) Interim board.--The term ``interim board'' means the
interim board of directors established in section 6(a) of this
Act.
(6) Originator.--The term ``originator'' means any
institution, bank, insurance company, business and industrial
development company, savings and loan association, commercial
finance company, trust company, credit union, small business
lending company or development company licensed by the Small
Business Administration to participate in financing programs
under the Small Business Act or the Small Business Investment
Act of 1958, or other entity that originates and services
loans.
(7) Permanent board.--The term ``permanent board'' means
the permanent board of directors established in section 6(b) of
this Act.
(8) Qualified loan.--The term ``qualified loan'' means an
extension of credit which--
(A) is secured by a fee-simple or lease hold
mortgage with status as a first lien on real estate
located in the United States or which is secured by an
unsubordinated lien on any other type of property or
equipment as the Board deems appropriate;
(B) is used to finance the acquisition,
rehabilitation, renovation, modernization,
refurbishing, or improvement of land, facilities,
buildings or equipment used for productive business
activities conducted in the United States;
(C) is an obligation of a person, corporation, or
partnership that has training or business experience
that, under criteria established by the Corporation, is
sufficient to ensure a reasonable likelihood that the
loan will be repaid according to its terms; and
(D) is an obligation of a small business concern.
(9) Small business concern.--The term ``Small Business
Concern'' means a concern which is independently owned and
operated and which is not dominant in its field of operations
and which, together with its affiliates--
(A) qualifies for loans under section 7(a) of the
Small Business Act under standards promulgated by the
Small Business Administration, or
(B) does not have net worth in excess of
$18,000,000 and does not have an average net income,
after Federal income taxes, for the preceding two years
in excess of $6,000,000 (average net income to be
computed without benefit of any carryover loss).
(10) State.--The term ``State'' has the meaning given such
term in section 3 of the Small Business Act.
SEC. 5. VENTURE ENHANCEMENT AND LOAN DEVELOPMENT ADMINISTRATION FOR
SMALLER UNDERCAPITALIZED ENTERPRISES.
(a) Establishment.--There is hereby established a corporation to be
known as the Venture Enhancement and Loan Development Administration
for Smaller Undercapitalized Enterprises, which shall be a federally
chartered instrumentality of the United States.
(b) Duties.--The Corporation shall--
(1) in consultation with originators, develop uniform
underwriting, security appraisal, and repayment standards for
qualified loans;
(2) determine the eligibility of certified poolers to
contract with the Corporation for the provision of guarantees
for specific mortgage pools; and
(3) provide guarantees for the timely repayment of
principal and interest on qualified loans and securities
representing interest in, or obligations backed by, pools of
qualified loans.
SEC. 6. BOARD OF DIRECTORS.
(a) Interim Board.--
(1) Number and appointment.--Until the permanent board of
directors established in subsection (b) first meets with a
quorum of its members present, the Corporation shall be under
the management of an interim board of directors composed of
seven members appointed by the President within ninety days
after the effective date of this Act as follows:
(A) three members appointed from among persons who
are representatives of banks, other financial
institutions or entities, and insurance companies,
(B) two members appointed from among persons who
are representative of small business, one of whom shall
be an owner or operator of a small business,
(C) two members appointed from among persons who
represent the interests of the general public and who
are not serving, and have not served, as a director or
officer of any financial institution or entity.
(2) Political affiliation.--Not more than four members of
the interim board shall be of the same political party.
(3) Vacancy.--A vacancy in the interim board shall be
filled in the manner in which the original appointment was
made.
(4) Terms.--The members of the interim board shall be
appointed for the life of such board.
(5) Quorum.--Four members of the interim board shall
constitute a quorum.
(6) Chairperson.--The President shall designate one of the
members of the interim board as the chairperson of the interim
board.
(7) Meetings.--The interim board shall meet at the call of
the chairperson or a majority of its members.
(8) Voting common stock.--
(A) Initial offering.--Upon the appointment of
sufficient members of the interim board to convene a
meeting with a quorum present, the interim board shall
arrange for an initial offering of common stock and
shall take whatever other actions are necessary to
proceed with the operations of the Corporation.
(B) Purchases.--The voting common stock shall be
offered to originators and to certified poolers.
(9) Termination.--The interim board shall terminate when
the permanent board of directors established in subsection (b)
first meets with a quorum present.
(b) Permanent Board.--
(1) Establishment.--Immediately after the date that at
least $30,000,000 of common stock of the Corporation has been
purchased and fully paid for, the Corporation shall arrange for
the election and appointment of a permanent board of directors.
After the termination of the interim board of directors, the
Corporation shall be under the management of the permanent
board.
(2) Composition.--The permanent board shall consist of nine
members, of which--
(A) five members shall be elected by holders of
common stock of the Corporation; and
(B) four members shall be appointed by the
President, by and with the advice and consent of the
Senate; of the members so appointed,--
(i) none shall be, or have been, an owner,
officer or director of any financial
institution or financial entity;
(ii) all shall be representatives of the
general public;
(iii) not more than two shall be members of
the same political party; and
(iv) at least one shall be experienced in
operating a small business and shall be a
representative of small business.
(3) Presidential appointees.--The President shall appoint
the members of the permanent board referred to in paragraph
(2)(B) not later than 60 days after the stock sale referred to
in paragraph (1).
(4) Vacancy.--
(A) Elected members.--Subject to paragraph (6), a
vacancy among the members elected to the permanent
board in the manner described in paragraph (2)(A) shall
be filled by the permanent board from among persons
eligible for election to the position for which the
vacancy exists.
(B) Appointed members.--A vacancy among the members
appointed to the permanent board under paragraph (2)(B)
shall be filled in the manner in which the original
appointment was made.
(5) Continuation of membership.--If--
(A) any member of the permanent board who was
elected to the permanent board from among persons who
are representatives of originators ceases to be such a
representative, or
(B) any member who was appointed by the President
becomes an owner, officer or director of any financial
institution or entity,
such member may continue as a member for not longer than a
forty five-day period beginning on the date such member ceases
to be such a representative.
(6) Terms.--
(A) Appointed members.--The members appointed by
the President shall serve until their successors have
been appointed and have qualified. The terms of such
members shall be staggered as follows: one shall serve
an initial term of one year, one an initial term of two
years, one an initial term of three years, and one an
initial term of four years. All subsequent appointments
shall be for a term of four years except that any
vacancy shall be filled for the unexpired term of the
vacancy. Such members shall be removed only for cause.
(B) Elected members.--The members elected under
paragraph (2)(A) shall each be elected annually for a
term ending on the date of the next annual meeting of
the common stockholders of the Corporation and shall
serve until their successors are elected and qualified.
(C) Vacancy appointment.--Any member elected or
appointed to fill a vacancy occurring before the
expiration of the term for which the predecessor of the
member was appointed shall be elected or appointed, as
the case may be, only for the remainder of such term.
(D) Service after expiration of term.--A number may
serve after the expiration of the term of the member
until the successor of the member has taken office.
(7) Quorum.--Five members of the permanent board shall
constitute a quorum.
(8) No additional pay for federal officers or employees.--
Members of the permanent board who are full time officers or
employees of the United States shall receive no additional pay
by reason of service on the permanent board.
(9) Chairperson.--The President shall designate one of the
members of the permanent board who are appointed by the
President as the chairperson of the permanent board.
(10) Meetings.--The permanent board shall meet at the call
of the chairperson or a majority of its members.
(c) Officers and staff.--The Board may appoint, employ, fix the pay
of, and provide other allowances and benefits for such officers and
employees of the Corporation as the Board determines to be appropriate.
SEC. 7. POWERS AND DUTIES OF CORPORATION AND BOARD.
(a) Authority.--After the Board has been duly constituted, subject
to the other provisions of this Act and other commitments and
requirements established pursuant to law, the Corporation may
guarantee, on such terms and conditions as it determines, qualified
loans or securities issued on the security of, or in participation in,
pooled interests in qualified loans, or it may issue securities based
on the security of, or in participation in, pooled interests in
qualified loans as provided in section 10.
(b) Obligations.--
(1) The aggregate amount of obligations of the Corporation
and obligations and securities guaranteed by the Corporation
outstanding at any one time shall not exceed thirty times the
sum of its capital, capital surplus, general surplus, reserves,
and undistributed earnings, expressly excluding subordinated
obligations, unless, based on amounts needed to assure
reasonable safety and soundness of the Corporation and with due
consideration of the need for the Corporation to facilitate the
extension of long term credit to small businesses, the
Secretary of the Treasury establishes a higher or lower ratio.
(2) All obligations issued by the Corporation or guaranteed
by the Corporation shall be approved by a majority vote of the
Board of Directors and shall be issued at such times and
contain such terms and conditions as the Corporation shall
determine, with approval of the Secretary of the Treasury. The
Secretary shall not approve the issuance of any obligations or
guarantees if he determines that the issuance would impair the
financial safety or soundness of the Corporation. In no event
shall the Corporation issue obligations or guarantees if the
amount of its net realized earnings deficit exceeds or thereby
would exceed the sum of its capital, capital surplus, general
surplus, reserves and undistributed earnings.
(c) Duties of the Board.--The Board shall--
(A) determine the general policies that shall
govern the operations of the Corporation;
(B) select, appoint, and determine the compensation
of qualified persons to fill such offices as may be
provided for in the bylaws of the Corporation; and
(C) assign to such persons such executive
functions, powers, and duties as may be prescribed by
the bylaws of the Corporation or by the Board.
(d) Powers of the Corporation.--The Corporation shall be a body
corporate and shall have the following powers:
(1) To operate under the direction of its Board.
(2) To issues stock in the manner provided in section 8.
(3) To adopt, alter, and use a corporate seal, which shall
be judicially noted.
(4) To provide for a president, one or more vice
presidents, secretary, treasurer, and such other officers,
employees, and agents, as may be necessary, define their duties
and compensation levels, all without regard to title 5, United
States Code, and require surety bonds or make other provisions
against losses occasioned by acts of the persons.
(5) To provide guarantees and issue obligations in the
manner provided under section 10.
(6) To have succession until dissolved by a law enacted by
the Congress.
(7) To prescribe bylaws, through the Board, not
inconsistent with law, that shall provide for--
(A) the classes of the stock of the Corporation;
and
(B) the manner in which--
(i) the stock shall be issued, transferred,
and retired;
(ii) the officers, employees, and agents of
the Corporation are selected;
(iii) the property of the Corporation is
acquired, held, and transferred;
(iv) the commitments are made and other
financial assistance of the Corporation is
provided;
(v) the general business of the Corporation
is conducted; and
(vi) the privileges granted by law to the
Corporation are exercised and enjoyed;
(8) To prescribe such standards as may be necessary to
carry out this Act.
(9) To enter into contracts and make payments with respect
to the contracts.
(10) To prescribe and impose fees and charges for services
by and guarantees of the Corporation as provided in section 12;
(11) To settle, adjust, and compromise, and with or without
consideration or benefit to the Corporation, to release or
waive in whole or in part, in advance or otherwise, any claim,
demand or right of, by, or against the Corporation.
(12) To sue and be sued in its corporate capacity and to
complain and defend in any action brought by or against the
Corporation in any State or Federal court of competent
jurisdiction.
(13) To make and perform contracts, agreements, and
commitments.
(14) To acquire, hold, lease, mortgage or dispose of, at
public or private sale, real and personal property, purchase or
sell any securities and obligations, and otherwise exercise all
the usual incidents or ownership of property necessary and
convenient to the business of the Corporation.
(15) To exercise such other incidental powers as are
necessary to carry out the powers, duties, and functions of the
Corporation in accordance with this Act.
(e) Federal Reserve Bank as Depositories and Fiscal Agents.--
Notwithstanding any other provision of law, any depository institution,
as defined in section 19(b)(1)(A) of the Federal Reserve Act (12 U.S.C.
461(b)(1)(A)), shall be authorized to make payments to the Corporation
of the capital contributions referred to in this Act, to receive stock
of the Corporation evidencing such capital contributions, and to
dispose of such stock, subject to the provisions of this Act. It may
also act as a depository for, or as a fiscal agent or custodian of, the
Corporation.
SEC. 8. STOCK ISSUANCE.
(a) Voting Common Stock.--
(1) Issue.--The Corporation shall issue voting common stock
having such par value as may be fixed by the Board from time to
time. Each share of voting common stock shall be entitled to
one vote with rights of cumulative voting at all elections of
directors.
(2) Authority of board to establish terms and procedures.--
The Board shall adopt such terms, conditions, and procedures
with regard to the issue of stock under this section as may be
necessary, including the establishment of a maximum amount
limitation on the number of shares of voting common stock that
may be outstanding at any time.
(3) Transferability.--Subject to such limitations as the
Board may impose, any share of any class of voting common stock
issued under this section shall be transferable, except that,
as to the Corporation, such shares shall be transferable only
on the books of the Corporation.
(b) Required Capital Contributions.--
(1) In general.--The Corporation may require each
originator and each certified pooler to make, or commit to
make, such nonrefundable capital contributions to the
Corporation as are reasonable and necessary to meet the
administrative expenses of the Corporation and to contribute to
the financial safety and soundness of the Corporation.
(2) Stock issued as consideration for contribution.--The
Corporation, from time to time, shall issue to each originator
or certified pooler voting common stock evidencing any capital
contributions made pursuant to this subsection.
(c) Dividends.--
(1) In general.--Such dividends as may be declared by the
Board, in its discretion, shall be paid by the Corporation to
the holders of the voting common stock of the Corporation pro
rata based on the total number of shares.
(2) Reserve requirements.--No dividend may be declared or
paid by the Board under this section unless the Board
determines that adequate provision has been made for reserves.
(3) Dividends prohibited while obligations are
outstanding.--No dividend may be declared or paid by the Board
under this section while any obligation issued by the
Corporation to the Secretary of the Treasury under section 15
remains outstanding.
(d) Nonvoting Common Stock.--The Corporation is authorized to issue
nonvoting common stock having such par value as may be determined by
the Board from time to time. Such nonvoting common stock shall be
freely transferable, except that, as to the Corporation, such stock
shall be transferable only on the books of the Corporation. Such
dividends as may be declared by the Board, in the discretion of the
Board, to the holders of voting common stock shall also be declared by
the Corporation to the holders of the nonvoting common stock of the
Corporation, subject to paragraphs (2) and (3) of subsection (c).
(e) Preferred Stock.--
(1) Authority of board.--The Corporation is authorized to
issue nonvoting preferred stock having such par value as may be
fixed by the Board from time to time. Such preferred stock
issued shall be freely transferable, except that, as to the
Corporation, such stock shall be transferred only on the books
of the Corporation.
(2) Rights of preferred stock.--Subject to paragraphs (2)
and (3) of subsection (c), the holders of the preferred stock
shall be entitled to such rate of cumulative dividends, and
such holders shall be subject to such redemption or other
conversion provisions, as may be provided for at the time of
issuance. No dividends shall be payable on any share of common
stock at any time when any dividend is due on any share of
preferred stock and has not been paid.
(3) Preference on termination of business.--In the event of
any liquidation, dissolution, or winding up of the business of
the Corporation, the holders of the preferred shares of stock
shall be paid in full at the par value thereof, plus all
accrued dividends, before the holders of the common shares
receive any payment.
SEC 9. CERTIFICATION OF LOAN POOLERS.
(a) Eligibility Standards.--
(1) Establishment required.--Within one hundred and eighty
days after the date on which the permanent board first meets
with a quorum present, the Corporation shall issue standards
for the certification of loan poolers, including eligibility
standards in accordance with paragraph (2).
(2) Minimum requirements.--To be eligible to be certified
under the standards referred to in paragraph (1), a loan pooler
shall--
(A) meet or exceed capital standards established by
the Board;
(B) have as one of his purposes, the sale or resale
of securities representing interests in, or obligations
backed by, pools of qualified loans that have been
guaranteed by the Corporation;
(C) demonstrate managerial ability with respect to
loan underwriting, servicing, and marketing that is
acceptable to the Corporation;
(D) adopt appropriate loan underwriting, appraisal,
and servicing standards and procedures that meet or
exceed the standards established by the Board;
(E) for purposes of enabling the Corporation to
examine the pooler, agree to allow officers or
employees of the Corporation to have access to all
books, accounts, financial records, reports, files, and
all other papers, things, or property, of any type
whatsoever, belonging to or used by such pooler that
are necessary to facilitate an examination of his
operations in connection with securities, and the pools
of qualified loans that back securities, for which the
Corporation has provided guarantees; and
(F) adopt appropriate minimum standards and
procedures relating to loan administration and
disclosure to borrowers concerning the terms and rights
applicable to loans for which a guarantee is provided,
in conformity with uniform standards established by the
Corporation.
(b) Certification by Corporation.--Within one hundred and twenty
days after receiving an application for certification under this
section, the Corporation shall certify the pooler if the applicant
meets the standards established by the Corporation under subsection
(a).
(c) Maximum Time Period for Certification.--Any certification by
the Corporation shall be effective for a period determined by the
Corporation, but not to exceed five years.
(d) Revocation.--
(1) In general.--After notice and an opportunity for a
hearing, the Corporation may revoke the certification of a
pooler if the Corporation determines that such pooler no longer
meets the standards referred to in subsection (a).
(2) Effect of revocation.--Revocation of a certification
shall not affect any pool guarantee that has been issued by the
Corporation.
SEC. 10. GUARANTEES AND OTHER OBLIGATIONS.
(a) Guarantee Authorized.--
(1) In general.--Subject to the requirements of this
section and on such other terms and conditions as the
Corporation shall consider appropriate, the Corporation shall
guarantee the timely payment of not to exceed 80 per centum of
principal and interest on qualified loans and 100 per centum of
the securities issued by a certified pooler that represent the
guaranteed portion of interests in, or obligations backed by,
any pool of qualified loans held by such certified pooler.
(2) Default.--If the issuer is unable to make any payment
of principal or interest on any qualified loan, or security for
which a guarantee has been provided by the Corporation under
paragraph (1), subject to the provisions of subsection (b) the
Corporation shall make such payment as and when due in cash,
and on such payment shall be subrogated fully to the rights
satisfied by such payment.
(3) Power of corporation.--Notwithstanding any other
provision of law, the Corporation is empowered, in connection
with any guarantee under this subsection, whether before or
after any default, to provide by contract with the issuer for
the extinguishment, on default by the issuer, of any
redemption, equitable, legal, or other right, title, or
interest of the issuer in any mortgage or mortgages
constituting the security for the loan or pool against which
the guaranteed securities are issued. In the event of default
and pursuant to the terms of the contract, the mortgages that
constitute such security or pool shall, proportionate to the
current ownership interests in the amount of the loans
originally retained by the originators, become the absolute
property of the Corporation subject only to the unsatisfied
rights of the holders of the securities.
(b) Standards Requiring Diversified Pools.--
(1) In general.--To reduce the risks incurred by the
Corporation in providing guarantees under this section and to
further the purposes of this Act, the Board shall establish
standards governing the composition of each pool (in connection
with which such guarantees are provided) over the period during
which the commitment to provide guarantees is effective.
(2) Minimum criteria for loan pools.--The standards
established by the Board pursuant to paragraph (1) for pools of
qualified loans shall, at a minimum--
(A) require that any pool of loans, if feasible
based upon the size of the pool--
(i) include security interests that are
distributed geographically; and
(ii) vary in terms of amounts of principal;
(B) prohibit the inclusion in any such pool of--
(i) any loan the principal amount of which
exceeds 5 per centum of the aggregate amount of
principal of all loans in such pool; and
(ii) two or more loans to related
borrowers; and
(C) require that each pool consist of not less than
twenty loans.
(c) Other Responsibilities of and Limitations on Poolers.--As a
condition for providing any guarantees under this section for
securities issued by a certified pooler that represent interests in, or
obligations backed by, any pool of qualified loans, the Corporation
shall require such pooler to agree to comply with the following
requirements:
(1) Default resolution.--The pooler shall act in accordance
with the standards of a prudent institutional lender to resolve
defaults.
(2) Subrogation of united states and corporation to
interests of pooler.--The proceeds of any collateral,
judgments, settlements, or guarantees received by the pooler
with respect to any loan in such pool shall be applied, after
payment of costs of collection--
(A) first, to reduce the amount of any principal
outstanding on any obligation of the Corporation that
was purchased by the Secretary of the Treasury under
section 15 to the extent the proceeds of such
obligation were used to pay claims for guarantees in
connection with such securities; and
(B) second, to reimburse the Corporation for any
such guarantee payments.
(3) Servicing.--The originator of any loan in such pool
shall be permitted, at his option, to retain the right to
service the loan.
(4) Compliance with diversified pool standards.--The pooler
shall comply with the standards adopted by the Board under
subsection (b) in establishing and maintaining the pool.
(5) Minority participation in public offerings.--The pooler
shall take such steps as may be necessary to ensure that
minority owned or controlled investment banking firms,
underwriters, and bond counsels throughout the United States
have an opportunity to participate to a significant degree in
any public offering of securities.
(d) Additional Authority of the Board.--To ensure the liquidity of
securities for which guarantees have been provided under this section,
the Board shall adopt appropriate standards regarding--
(1) the characteristics of any pool of qualified loans
serving as collateral for such securities;
(2) registration requirements (if any) with respect to such
securities; and
(3) transfer requirements.
(e) In addition to the guarantees authorized herein, the
Corporation may purchase 80 per centum of the principal amount of
qualified loans. If it makes such purchases, it shall promptly issue an
equivalent amount of securities which are based on the security of, or
in participation in, pooled interests in the purchased portion of the
qualified loans.
SEC. 11. STANDARDS FOR QUALIFIED LOANS.
(a) Standards.--Not later than one hundred and eighty days after
the appointment and election of the Board, the Corporation, in
consultation with originators, shall establish uniform underwriting,
security appraisal, and repayment standards for qualified loans. In
establishing standards for qualified loans, the Corporation shall limit
eligibility, so far as practicable, to loans that are deemed by the
Board to be of such quality so as to meet, substantially and generally,
the purchase standards imposed by private institutional investors.
(b) Minimum Criteria.--To further the purpose of this Act to
provide a new source of long-term fixed rate financing to assist small
businesses, the standards established by the Board pursuant to
subsection (a) shall, at a minimum--
(1) set the maximum principal amount of any loan which the
Corporation will purchase or guarantee;
(2) limit the maximum term of the loan to thirty years in
the case of land or facilities or to ten years in the case of
equipment, but in no event longer than the useful life of the
property;
(3) require that the principal amount of the loan will be
fully amortized over the life of the loan;
(4) provide that no loan shall have a loan-to-value ratio
in excess of 90 per centum;
(5) require each borrower to demonstrate sufficient
cashflow to adequately service the loan;
(6) contain sufficient documentation standards; and
(7) contain adequate standards to protect the integrity of
the appraisal process with respect to any loan.
(c) Congressional Review.--No standard prescribed under this
section shall take effect before the later of--
(1) the end of a period consisting of thirty legislative
days and beginning on the date such standards are submitted to
the Congress; or
(2) the end of a period consisting of ninety calendar days
and beginning on such date the standards are submitted.
(e) Nondiscrimination Requirement.--The standards established under
subsection (a) shall not discriminate against small originators or
small mortgage loans that are at least $50,000.
SEC. 12. FUNDING FOR GUARANTEE RESERVES OF CORPORATION.
(a) Guarantee Fees.--
(1) Loan fee.--At the time a guarantee is issued for a
qualified loan by the Corporation or at the time the
Corporation purchases a loan pursuant to section 10(e), the
Corporation shall assess the originator a fee of not more than
2 per centum of the initial principal amount of the loan.
(2) Pooler fee.--At the time a guarantee is issued for
securities issued by a qualified pooler, the Corporation shall
assess such pooler an additional fee of not more than one-half
of 1 per centum of the principal amount of the loans then
constituting the pool if the originator has already paid the
fee for guarantee of a qualified loan as provided in paragraph
(1). If the pool includes any loan on which the originator has
not paid a guarantee fee, the Corporation shall assess the
pooler a fee of not more than 2\1/2\ per centum of the
principal amount of any such loan.
(3) Determination of amount.--The Corporation shall
establish such fees based on the amount of risk incurred by the
Corporation in providing the financial assistance or guarantees
with respect to which such fee is assessed, as determined by
the Corporation. Fees assessed under paragraphs (1) or (2)
shall be established on an actuarially sound basis, but not to
exceed the per centums specified.
(b) Annual Review by GAO.--The Comptroller General of the United
States shall annually review, and submit to the Congress a report
regarding, the actuarial soundness and reasonableness of the fees
established and amounts collected by the Corporation under this
subsection.
(c) Corporation Reserve Against Guarantee Losses Required.--
(1) In general.--So much of the fees assessed under this
section as the Board determines to be necessary shall be set
aside by the Corporation in a segregated account as a reserve
against losses arising out of the guarantee activities of the
Corporation.
(2) Exhaustion of reserve required.--The Corporation may
not issue obligations to the Secretary of the Treasury under
section 15 in order to meet the obligations of the Corporation
with respect to any guarantees or securities issued provided
under this Act until the reserve established under paragraph
(1) has been exhausted.
(d) Fees to Cover Administrative Costs Authorized.--The Corporation
may impose charges or fees in reasonable amounts in connection with the
administration of its activities under this Act to recover its costs
for performing such administration.
SEC. 13. SUPERVISION, EXAMINATION, AND REPORT OF CONDITION.
(a) Regulation.--
(1) Authority.--The Secretary of the Treasury (hereinafter
in this section referred to as the Secretary) is authorized and
directed to examine the financial condition of the Corporation
and its activities. The Secretary shall have general regulatory
power over the Corporation to insure that the purposes of this
Act are accomplished, especially with respect to the
Corporation's safety and soundness and the safe and sound
performance of the Corporation's powers, functions and duties.
(2) Considerations.--In exercising its authority pursuant
to this section, the Secretary shall consider--
(A) the purposes for which the Corporation was
created;
(B) the practices appropriate to the conduct of
secondary markets in loans; and
(C) the reduced levels of risk associated with
appropriately structured secondary market transactions.
(b) Examinations and Audits.--
(1) In general.--The financial transactions of the
Corporation shall be examined by examiners of the Secretary in
accordance with the principles and procedures applicable to
commercial corporate transactions under such rules and
regulations as may be prescribed by the Secretary.
(2) Frequency.--The examinations shall occur at such times
as the Secretary may determine, but in no event less than once
each year.
(3) Access.--The examiners shall--
(A) have access to all books, accounts, financial
records, reports, rules, and all other papers, things,
or property belonging to or in use by the Corporation
and necessary to facilitate the audit; and
(B) be afforded full access for verifying
transactions with certified poolers and other entities
with whom the Corporation conducts transactions.
(c) Annual Report of Condition.--The Corporation shall make and
publish an annual report of condition as prescribed by the Secretary.
Each report shall contain financial statements prepared in accordance
with generally accepted accounting principles and contain such
additional information as the Secretary may by regulation prescribe.
The financial statements of the Corporation shall be audited by an
independent public accountant. If the Secretary, in his discretion,
determines that it would contribute to the financial safety and
soundness of the Corporation and would not impose an undue expense or
administrative burden on it, he may also require the Corporation to
include in the report additional financial statements prepared on a
market-value basis, including the Corporation's market-value net worth.
(d) Assessments To Cover Costs.--The Secretary shall assess the
Corporation for the cost to the Secretary of any regulatory activities
conducted under this section, including the cost of any examination.
SEC. 14. SECURITIES.
(a) Federal Laws.--
(1) Applicability of certain federal securities laws.--For
purposes of section 3(a)(2) of the Securities Act of 1933, no
security issued by the Corporation nor qualified loan nor
security representing an interest in a pool of qualified loans
for which guarantees have been provided by the Corporation
shall be deemed to be a security issued or guaranteed by a
person controlled or supervised by, or acting as an
instrumentality of, the Government of the United States. No
such security shall be deemed to be a ``government security''
for purposes of the Securities Exchange Act of 1934 or for
purposes of the Investment Company Act of 1940.
(2) No full faith and credit of the united states.--Each
loan or security for which credit enhancement has been provided
by the Corporation and each security issued by the Corporation
shall clearly indicate that it is not an obligation of, and is
not guaranteed as to principal or interest by the United
States, or any other agency or instrumentality of the United
States (other than the Venture Enhancement and Loan Development
Administration for Smaller Undercapitalized Enterprises).
(b) State Securities Laws.--
(1) General exemption.--Any security issued by the
Corporation and any qualified loan, security or obligation that
has been provided a guarantee by the Corporation shall be
exempt from any law of any State with respect to or requiring
registration or qualification of securities or real estate to
the same extent as any obligation issued by, or guaranteed as
to principal and interest by, the United States or any other
agency or instrumentality of the United States.
(2) State override.--The provisions of paragraph (1) shall
not be applicable to any State that, during the 5-year period
beginning on the effective date of this Act, enacts a law
that--
(A) specifically refers to this subsection; and
(B) expressly provides that paragraph (1) shall not
apply to the State.
(c) Authorized Investments.--
(1) In general.--Securities issued by the Corporation and
qualified loans, or securities representing an interest in, or
obligations backed by, pools of qualified loans with respect to
which the Corporation has provided a guarantee shall be
authorized investments of any person, trust corporation,
partnership, association, business trust, or business entity
created pursuant to or existing under the laws of the United
States or any State to the same extent that the person, trust,
corporation, partnership, association, business trust, or
business entity is authorized under any applicable law to
purchase, hold, or invest in obligations issued by or
guaranteed as to principal and interest by the United States or
any agency or instrumentality of the United States. Such loans,
securities or obligations may be accepted as security for all
fiduciary, trust, and public funds, the investment or deposits
of which shall be under the authority and control of the United
States or any State or any officers of either.
(2) State limitations on purchase, holding, or
investment.--If State law limits the purchase, holding, or
investment in obligations issued by the United States by the
person, trust, corporation, partnership, association, business
trust, or business entity, then qualified loans, or securities
or obligations of a certified pooler on which the Corporation
has provided a guarantee shall be considered to be obligations
issued by the United States for purposes of the limitation.
(3) Nonapplicability of provisions.--
(A) Subsequent state law.--Paragraphs (1) and (2)
shall not apply with respect to a particular person,
trust, corporation, partnership, association, business
trust, or business entity, or class thereof, in any
State that, prior to the expiration of the five year
period beginning on the date of the enactment of this
Act, enacts a law that specifically refers to this
section and either prohibits or provides for a more
limited authority to purchase, hold, or invest in the
qualified loans or securities by any person, trust,
corporation, partnership, association, business trust,
or business entity, or class thereof, than is provided
in paragraphs (1) and (2).
(B) Effect of subsequent state law.--The enactment
by any State of a law of the type described in
subparagraph (A) shall not affect the validity of any
contractual commitment to purchase, hold, or invest
that was made prior to the effective date of the law
and shall not require the sale or other disposition of
any loans or securities acquired prior to the effective
date of the law.
(d) State Usury Laws Superseded.--Any provision of the constitution
or law of any State which expressly limits the rate or amount of
interest, discount points, finance charges, or other charges that may
be charged, taken, received, or reserved by the Corporation,
originators or certified poolers shall not apply to any qualified loan
made by an originator or to security issued by the Corporation or a
certified pooler in accordance with this Act.
SEC. 15. AUTHORITY TO ISSUE OBLIGATIONS TO COVER LOSSES OF CORPORATION.
(a) Sale of Obligations to Treasury.--
(1) In general.--Subject to the limitations contained in
section 12(c) and the requirement of paragraph (2), the
Corporation may issue obligations to the Secretary of the
Treasury, the proceeds of which may be used by the Corporation
solely for the purpose of fulfilling the obligations of the
Corporation under any security issued by the Corporation or
guarantee provided by the Corporation under this Act.
(2) Certification.--The Secretary of the Treasury may
purchase obligations of the Corporation under paragraph (1)
only if the Corporation certifies to the Secretary that--
(A) the requirements of section 12(c) have been
fulfilled; and
(B) the proceeds of the sale of such obligations
are needed to fulfill the obligations of the
Corporation under any guarantee provided by or security
issued by the Corporation under this Act.
(b) Limitation of Amount of Outstanding Obligations.--The aggregate
amount of obligations issued by the Corporation under subsection (a)(1)
which may be held by the Secretary of the Treasury at any time (as
determined by the Secretary) shall not exceed $1,500,000,000.
(c) Terms of Obligation.--
(1) Interest.--Each obligation purchased by the Secretary
of the Treasury shall bear interest at a rate determined by the
Secretary, taking into consideration the average rate on
outstanding marketable obligations of the United States as of
the last day of the last calendar month ending before the date
of the purchase of such obligation.
(2) Redemption.--The Secretary of the Treasury shall
require that such obligations be repurchased by the Corporation
within a reasonable time.
(d) Coordination with Title 31, United States Code.--
(1) Authority to use proceeds from sale of treasury
securities.--For the purpose of purchasing obligations of the
Corporation, the Secretary of the Treasury may use as a public
debt transaction the proceeds from the sale by the Secretary of
any securities issued under chapter 31 of title 31, United
States Code, and the purposes for which securities may be
issued under such chapter are extended to include such
purchases.
(2) Treatment of transactions.--All purchases and sales by
the Secretary of the Treasury of obligations issued by the
Corporation under this section shall be treated as public debt
transactions of the United States.
(e) Authorization of Appropriations.--There is authorized to be
appropriated to the Secretary of the Treasury $1,500,000,000, without
fiscal year limitation, to carry out the purposes of this Act.
SEC. 16. FEDERAL JURISDICTION.
(a) Notwithstanding section 1349 of title 28, United States Code,
or any other provision of law:
(1) The Corporation shall be considered an agency under
sections 1345 and 1442 of such title.
(2) All civil actions to which the Corporation is a party
shall be deemed to arise under the laws of the United States
and, to the extent applicable, shall be deemed to be governed
by Federal common law. The district courts of the United States
shall have original jurisdiction of all such actions, without
regard to the amount of value.
(3) Any civil or other action, case, or controversy in a
court of a State or any court, other than a district court of
the United States, to which the Corporation is a party may at
any time before trial be removed by the Corporation, without
the giving of any bond or security--
(A) to the district court of the United States for
the district and division embracing the place where the
same is pending; or
(B) if there is no such district court, to the
district court of the United States for the district in
which the principal office of the Corporation is
located;
by following any procedure for removal for causes in effect at
the time of such removal.
(4) No attachment or execution shall be issued against the
Corporation or any of the property of the Corporation before
final judgment in any Federal, State, or other court.
(b) Nature of Corporation.--The Corporation shall, for the purposes
of section 14(b)(2) of the Federal Reserve Act (12 U.S.C. 355), be
deemed to be an agency of the United States. The obligations of the
Corporation shall be deemed to be obligations of the United States for
purposes of section 3124 of title 31, United States Code. For the
purpose of section 101(41) of title 11, United States Code, the
Corporation shall be deemed to be an agency of the United States;
however, for the purpose of section 101(35) of title 11, United States
Code, the Corporation shall not be deemed to be a governmental unit,
but instead shall be deemed to be a corporation.
(c) Fraud by Corporate Officer.--Section 1006 of title 18, United
States Code, is amended by inserting before ``or any Small Business
Investment Company,'' the following: ``or the Venture Enhancement and
Loan Development Administration for Smaller Undercapitalized
Enterprises,''.
(d) Banking Authority.--The sixth sentence of the seventh paragraph
of section 5136 of the Revised Statutes of the United States (12 U.S.C.
24) is amended by inserting after ``Student Loan Marketing
Association,'' the following ``or obligations or other instruments or
securities of the Venture Enhancement and Loan Development
Administration for Smaller Undercapitalized Enterprises,''.
SEC. 17. GAO AUDIT OF CORPORATION.
(a) Audits Authorized.--Notwithstanding any other provision of law
and under such regulations as the Comptroller General may prescribe,
the Comptroller General shall perform a financial audit of the
Corporation on whatever basis the Comptroller General determines to be
necessary.
(b) Cooperation of Corporation Required.--The Corporation shall--
(1) make available to the Comptroller General for audit all
records and property of, or used or managed by, the Corporation
which may be necessary for the audit; and
(2) provide the Comptroller General with facilities for
verifying transactions with the balances of securities held by
any depositary, fiscal agent, or custodian.
SEC. 18. FEDERAL FUNDING.
(a) Interim Temporary Advances.--After the Corporation has sold the
minimum amount of common stock as provided in section 10(b)(1), the
Secretary of the Treasury shall purchase obligations of the Corporation
in such sums, and at such times, as the Corporation may request, but
not to exceed $300,000,000. The proceeds shall be deemed to be capital
of the Corporation for purposes of section 7(b)(1).
(1) Term and Interest.--The obligations shall be repayable
over a term of ten years commencing fifteen years after the
date of the purchase by the Secretary. Repayments shall be
amortized and the obligations shall bear interest at a rate
determined by the Secretary, taking into consideration the
current average market yield on outstanding marketable
obligations of the United States with fifteen years maturities,
adjusted to the nearest one-eighth of 1 per centum. During the
first five years of each obligation, interest payments shall be
limited annually not to exceed the retained earnings of the
corporation after all other expenses except such interest
payments have been made.
(2) Prepayments.--The Corporation may pre-pay the
obligations at any time without the payment of any type of
prepayment penalty.
(b) Warrants.--Upon the purchase of obligations pursuant to
subsection (a), the Corporation shall issue warrants to the Secretary
of the Treasury for the purchase of non-voting common stock in the
Corporation. If the warrants are exercised by the Secretary, the stock
so acquired shall be non-voting as long as it is held by the Secretary.
The warrants shall be freely transferable and if exercised by any
person in any capacity other than as an employee or officer of the
Federal government, stock so acquired shall be with full voting rights.
(1) Amount.--The exercise price of the warrants shall be
the average price at which voting common stock of the
Corporation, was sold during the year preceding issuance of the
warrants, plus 10 per centum. The Secretary shall receive
warrants in such amounts as will enable the Secretary to
purchase one dollar in common stock for each ten dollars of
obligations purchased under subsection (a).
(2) Duration.--The warrants shall be exercisable at any
time by the Secretary for a period of 15 years from the date of
issuance.
(c) Authorization.--In addition to the amounts authorized in
section 15(e), there are authorized to be appropriated to the Secretary
of Treasury, $300,000,000 without fiscal year limitation, to carry out
the provisions of this section.
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