[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 512 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                 S. 512

To facilitate the providing of loan capital to small business concerns, 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                March 4 (legislative day, March 3), 1993

   Mr. Kerry introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 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 issue 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 five-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 year 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 fifteen 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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