[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5297 Introduced in House (IH)]
111th CONGRESS
2d Session
H. R. 5297
To create the Small Business Lending Fund Program to direct the
Secretary of the Treasury to make capital investments in eligible
institutions in order to increase the availability of credit for small
businesses, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 13, 2010
Mr. Frank of Massachusetts (for himself, Ms. Waters, Mrs. Maloney, Mr.
Gutierrez, Mr. Watt, Mr. Moore of Kansas, Mr. Hinojosa, Mr. Meeks of
New York, Mr. Miller of North Carolina, Mr. Scott of Georgia, Mr. Al
Green of Texas, Ms. Bean, Ms. Moore of Wisconsin, Mr. Ellison, Mr.
Klein of Florida, Mr. Perlmutter, Mr. Peters, Mr. Maffei, and Mrs.
Dahlkemper) introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To create the Small Business Lending Fund Program to direct the
Secretary of the Treasury to make capital investments in eligible
institutions in order to increase the availability of credit for small
businesses, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Lending Fund Act of
2010''.
SEC. 2. PURPOSE.
The purpose of this Act is to address the ongoing effects of the
financial crisis on small businesses by providing temporary authority
to the Secretary of the Treasury to make capital investments in
eligible institutions in order to increase the availability of credit
for small businesses.
SEC. 3. DEFINITIONS.
For purposes of this Act:
(1) Appropriate committees of congress.--The term
``appropriate committees of Congress'' means--
(A) the Committee on Small Business and
Entrepreneurship, the Committee on Agriculture,
Nutrition, and Forestry, the Committee on Banking,
Housing, and Urban Affairs, the Committee on Finance,
the Committee on the Budget, and the Committee on
Appropriations of the Senate; and
(B) the Committee on Small Business, the Committee
on Agriculture, the Committee on Financial Services,
the Committee on Ways and Means, the Committee on the
Budget, and the Committee on Appropriations of the
House of Representatives.
(2) Appropriate federal banking agency.--The term
``appropriate Federal banking agency'' has the meaning given
such term under section 3(q) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(q)).
(3) Bank holding company.--The term ``bank holding
company'' has the meaning given such term under section 2(a)(1)
of the Bank Holding Company Act of 1956 (12 U.S.C.
1841(2)(a)(1)).
(4) Call report.--The term ``call report'' means--
(A) reports of Condition and Income submitted to
the Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, and
the Federal Deposit Insurance Corporation;
(B) the Office of Thrift Supervision Thrift
Financial Report; and
(C) any report that is designated by the Office of
the Comptroller of the Currency, the Board of Governors
of the Federal Reserve System, the Federal Deposit
Insurance Corporation, or the Office of Thrift
Supervision, as applicable, as a successor to any
report referred to in subparagraph (A) or (B).
(5) CDCI.--The term ``CDCI'' means the Community
Development Capital Investment program created by the Secretary
under the Troubled Asset Relief Program established by the
Emergency Economic Stabilization Act of 2008.
(6) CDCI investment.--The term ``CDCI investment'' means,
with respect to any eligible institution, the principal amount
of any investment made by the Secretary in such eligible
institution under the CDCI that has not been repaid.
(7) CPP.--The term ``CPP'' means the Capital Purchase
Program created by the Secretary under the Troubled Asset
Relief Program established by the Emergency Economic
Stabilization Act of 2008.
(8) CPP investment.--The term ``CPP investment'' means,
with respect to any eligible institution, the principal amount
of any investment made by the Secretary in such eligible
institution under the CPP that has not been repaid.
(9) Eligible institution.--The term ``eligible
institution'' means--
(A) any insured depository institution, which--
(i) is not controlled by a bank holding
company or savings and loan holding company
that is also an eligible institution;
(ii) has total assets of equal to or less
than $10,000,000,000, as reported in the call
report as of the end of the fourth quarter of
calendar year 2009; and
(iii) is not directly or indirectly
controlled by any company or other entity that
has total assets of equal to or less than
$10,000,000,000, as so reported;
(B) any bank holding company, which--
(i) has total assets of equal to or less
than $10,000,000,000; and
(ii) has one or more insured depository
institution subsidiaries that have combined
total assets of equal to or less than
$10,000,000,000, as reported in the call report
of each insured depository institution
subsidiary as of the end of the fourth quarter
of calendar year 2009; and
(C) any savings and loan holding company, which--
(i) has total assets of equal to or less
than $10,000,000,000; and
(ii) has one or more insured depository
institution subsidiaries that have total assets
of equal to or less than $10,000,000,000, as
reported in the call report of each insured
depository institution subsidiary as of the end
of the fourth quarter of calendar year 2009.
(10) Fund.--The term ``Fund'' means the Small Business
Lending Fund established by section 4(a)(1) of this Act.
(11) Insured depository institution.--The term ``insured
depository institution'' has the meaning given such term under
section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1813(c)(2)).
(12) Program.--The term ``Program'' means the Small
Business Lending Fund Program authorized by section 4(a)(2) of
this Act.
(13) Savings and loan holding company.--The term ``savings
and loan holding company'' has the meaning given such term
under section 10(a)(1)(D) of the Home Owners' Loan Act (12
U.S.C. 1467a(a)(1)(D)).
(14) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(15) Small business lending.--The term ``small business
lending'' means--
(A) commercial and industrial loans plus owner-
occupied nonfarm, nonresidential real estate loans;
(B) loans to finance agricultural production and
other loans to farmers; and
(C) loans secured by farmland, as defined by and
reported in an eligible institution's quarterly call
report.
In the case of eligible institutions that are bank holding
companies or savings and loan holding companies having one or
more insured depository institution subsidiaries, small
business lending shall be measured based on the combined small
business lending reported in the call report of the insured
depository institution subsidiaries.
SEC. 4. SMALL BUSINESS LENDING FUND.
(a) Fund and Program.--
(1) Fund established.--There is established in the Treasury
of the United States a fund to be known as the ``Small Business
Lending Fund'', which shall be administered by the Secretary.
(2) Programs authorized.--The Secretary is authorized to
establish the Small Business Lending Fund Program for using the
Fund consistent with this Act, and a program for the allocation
of Federal funds to participating States to expand the
availability of credit to small businesses.
(b) Use of Fund.--
(1) In general.--Subject to paragraph (2), the Fund shall
be available to the Secretary, without further appropriation or
fiscal year limitation, for the costs of purchases (including
commitments to purchase), and modifications of such purchases,
of preferred stock and other financial instruments from
eligible institutions on such terms and conditions as are
determined by the Secretary in accordance with this Act.
(2) Maximum purchase limit.--The aggregate amount of
purchases (and commitments to purchase) made pursuant to
paragraph (1) may not exceed $30,000,000,000.
(c) Credits to the Fund.--There shall be credited to the Fund
amounts made available pursuant to section 9, to the extent provided by
appropriations Acts.
(d) Terms.--
(1) Application.--
(A) Eligible institutions having total assets equal
to or less than $1,000,000,000, as reported in a call
report as of the end of the fourth quarter of calendar
year 2009, may apply to receive a capital investment
from the Fund in an amount not exceeding 5 percent of
risk-weighted assets, as reported in the call report
immediately preceding the date of application, less the
amount of any CDCI investment and any CPP investment.
(B) Eligible institutions having total assets of
more than $1,000,000,000 but less than $10,000,000,000,
as of the end of the fourth quarter of calendar year
2009, may apply to receive a capital investment from
the Fund in an amount not exceeding 3 percent of risk-
weighted assets, as reported in the call report
immediately preceding the date of application, less the
amount of any CDCI investment and any CPP investment.
(C) In the case of an eligible institution that is
a bank holding company or a savings and loan holding
company having one or more insured depository
institution subsidiaries, total assets shall be
measured based on the combined total assets reported in
the call report of the insured depository institution
subsidiaries as of the end of the fourth quarter of
calendar year 2009 and risk-weighted assets shall be
measured based on the combined risk-weighted assets of
the insured depository institution subsidiaries as
reported in the call report immediately preceding the
date of application.
(D) If an eligible institution that applies to
receive a capital investment under the Program is under
the control of a bank holding company or a savings and
loan holding company, then the Secretary may use the
Small Business Lending Fund to purchase preferred stock
or other financial instruments from the top-tier bank
holding company or savings and loan holding company of
such eligible institution, as applicable. For purposes
of this paragraph, the term ``control'' with respect to
a bank holding company shall have the same meaning as
in section 2(a)(2) of the Bank Holding Company Act of
1956 (12 U.S.C. 1841(2)(a)(2)). For purposes of this
paragraph, the term ``control'' with respect to a
savings and loan holding company shall have the same
meaning as in 10(a)(2) of the Home Owners' Loan Act (12
U.S.C. 1467a(a)(2)).
(E) At the time that an applicant submits an
application to the Secretary for a capital investment
under the Program, the applicant shall deliver to the
appropriate Federal banking agency a small business
lending plan describing how the applicant's business
strategy and operating goals will allow it to address
the needs of small businesses in the areas it serves.
This plan shall be confidential supervisory
information.
(2) Consultation with regulators.--For each eligible
institution that applies to receive a capital investment under
the Program, the Secretary shall consult with the appropriate
Federal banking agency for the eligible institution to
determine whether the eligible institution may receive such
capital investment.
(3) Limitation on denial.--The Secretary may not deny an
application by an eligible institution for a capital investment
under the Program solely on the basis of the composite rating
of the eligible institution under the Uniform Financial
Institutions Rating System (or an equivalent rating under a
comparable rating system).
(4) Incentives to lend.--
(A) Any preferred stock or other financial
instrument issued to Treasury by an eligible
institution receiving a capital investment under the
Program shall provide that--
(i) the rate at which dividends or interest
are payable shall be 5 percent per annum
initially;
(ii) within the first 2 years after the
date of the capital investment under the
Program, the rate may be adjusted based on the
amount of an eligible institution's small
business lending. Changes in small business
lending shall be measured against the amount of
small business lending reported by the eligible
institution in its call report for the last
quarter in calendar year 2009 or the average
amount of small business lending reported by
the eligible institution in all call reports
for calendar year 2009, whichever is lower,
minus adjustments from each quarterly balance
in respect of--
(I) net loan charge offs with
respect to small business lending; and
(II) gains realized by the eligible
institution resulting from mergers,
acquisitions or purchases of loans
after origination and syndication;
which adjustments shall be determined
in accordance with guidance promulgated
by the Secretary; and
(iii) during any calendar quarter during
the initial 2-year period referred to in clause
(ii), an institution's rate shall be adjusted
to reflect the following schedule, based on
that institution's change in small business
lending relative to the baseline--
(I) if small business lending has
increased by less than 2.5 percent, the
dividend or interest rate shall be 5
percent;
(II) if small business lending has
increased by 2.5 percent or greater,
but by less than 5.0 percent, the
dividend or interest rate shall be 4
percent;
(III) if small business lending has
increased by 5.0 percent or greater,
but by less than 7.5 percent, the
dividend or interest rate shall be 3
percent;
(IV) if small business lending has
increased by 7.5 percent or greater,
and but by less than 10.0 percent, the
dividend or interest rate shall be 2
percent; or
(V) if small business lending has
increased by 10 percent or greater, the
dividend or interest rate shall be 1
percent.
(B) The initial dividend or interest rate shall be
based on call report data published in the quarter
immediately preceding the date of the capital
investment under the Program.
(C) Any rate adjustment shall occur in the calendar
quarter following the publication of call report data,
such that the rate based on call report data from any
one calendar quarter, which is published in the first
following calendar quarter, shall be adjusted in that
first following calendar quarter and payable in the
second following quarter.
(D) Generally, the rate based on call report data
from the eighth calendar quarter after the date of the
capital investment under the Program shall be payable
until the expiration of the 5-year period that begins
on the date of the investment. In the case where
lending has remained the same or decreased relative to
the institution's baseline in the eighth quarter after
the date of the capital investment under the Program,
the rate shall be 7 percent until the expiration of the
5-year period that begins on the date of the
investment.
(E) The dividend or interest rate paid on any
preferred stock or other financial instrument issued by
an eligible institution that receives a capital
investment under the Program shall increase to 9
percent at the end of the 5-year period that begins on
the date of the capital investment under the Program.
(F) The reduction in the dividend or interest rate
payable to Treasury by any eligible institution shall
be limited such that the rate reduction shall not apply
to an amount of the investment made by Treasury that is
greater than the increase in lending realized under
this program. The Secretary may issue guidelines that
will apply to new capital investments limiting the
amount of capital available to eligible institutions
consistent with this limitation.
(G) Before making a capital investment in an
eligible institution that is an S corporation or a
corporation organized on a mutual basis, the Secretary
may adjust the dividend or interest rate on the
financial instrument to be issued to the Secretary,
from the dividend or interest rate that would apply
under subparagraphs (A) through (F), to take into
account any differential tax treatment of securities
issued by such eligible institution. For purpose of
this subparagraph, the term ``S corporation'' has the
same meaning as in section 1361(a) of the Internal
Revenue Code of 1986.
(5) Additional incentives to repay.--The Secretary may, by
regulation or guidance issued under section 5(9), establish
repayment incentives in addition to the incentive in paragraph
(4)(E) that will apply to new capital investments in a manner
that the Secretary determines to be consistent with the
purposes of this Act.
(6) Capital purchase program refinance.--The Secretary
shall, in a manner that the Secretary determines to be
consistent with the purposes of this Act, issue regulations and
other guidance to permit eligible institutions to refinance
securities issued to Treasury under the CDCI and the CPP for
securities to be issued under the Program.
(7) Additional terms.--The Secretary may, by regulation or
guidance issued under section 5(9), make modifications that
will apply to new capital investments in order to manage risks
associated with the administration of the Small Business
Lending Fund in a manner consistent with the purposes of this
Act.
SEC. 5. ADDITIONAL AUTHORITIES OF THE SECRETARY.
The Secretary may take such actions as the Secretary deems
necessary to carry out the authorities in this Act, including, without
limitation, the following:
(1) The Secretary may use the services of any agency or
instrumentality of the United States or component thereof on a
reimbursable basis, and any such agency or instrumentality or
component thereof is authorized to provide services as
requested by the Secretary using all authorities vested in or
delegated to that agency, instrumentality, or component.
(2) The Secretary may enter into contracts, including
contracts for services authorized by section 3109 of title 5,
United States Code.
(3) The Secretary may designate any bank, savings
association, trust company, or security broker or dealer as a
financial agent of the Federal Government and such institution
shall perform all such reasonable duties related to this Act as
financial agent of the Federal Government as may be required.
The Secretary shall have authority to amend existing agreements
with financial agents, entered into during the 2-year period
before the date of enactment of this Act, to perform reasonable
duties related to this Act.
(4) The Secretary may exercise any rights received in
connection with any preferred stock or other financial
instruments or assets purchased or acquired pursuant to the
authorities granted under this Act.
(5) The Secretary may manage any assets purchased under
this Act, including revenues and portfolio risks therefrom.
(6) The Secretary may sell, dispose of, transfer, exchange
or enter into securities loans, repurchase transactions, or
other financial transactions in regard to, any preferred stock
or other financial instrument or asset purchased or acquired
under this Act, upon terms and conditions and at a price
determined by the Secretary.
(7) The Secretary may manage or prohibit conflicts of
interest that may arise in connection with the administration
and execution of the authorities provided under this Act.
(8) The Secretary may establish and use vehicles, subject
to supervision by the Secretary, to purchase, hold, and sell
preferred stock or other financial instruments and issue
obligations.
(9) The Secretary may, in consultation with the
Administrator of the Small Business Administration, issue such
regulations and other guidance as may be necessary or
appropriate to define terms or carry out the authorities or
purposes of this Act.
SEC. 6. CONSIDERATIONS.
In exercising the authorities granted in this Act, the Secretary
shall take into consideration--
(1) increasing the availability of credit for small
businesses;
(2) providing funding to eligible institutions that serve
small businesses in low- and moderate-income, minority and
other underserved communities;
(3) protecting and increasing American jobs;
(4) ensuring that all eligible institutions may apply to
participate in the program established under this Act, without
discrimination based on geography;
(5) providing transparency with respect to use of funds
provided under this Act; and
(6) minimizing the cost to taxpayers of exercising the
authorities.
SEC. 7. REPORTS.
The Secretary shall provide to the appropriate committees of
Congress--
(1) within 7 days of the end of each month commencing with
the first month in which transactions are made under the
Program, a written report describing all of the transactions
made during the reporting period pursuant to the authorities
granted under this Act; and
(2) after the end of March and the end of September,
commencing September 30, 2010, a written report on all
projected costs and liabilities, all operating expenses,
including compensation for financial agents, and all
transactions made by the Fund.
SEC. 8. OVERSIGHT AND AUDITS.
(a) Inspector General Oversight.--The Inspector General of the
Department of the Treasury shall conduct, supervise, and coordinate
audits and investigations of the purchase (and commitments to purchase)
of preferred stock and other financial instruments under the Program.
(b) GAO Audit.--The Comptroller General of the United States shall
perform an annual audit of the Program and issue a report to the
appropriate committees of Congress containing the results of such
audit.
SEC. 9. CREDIT REFORM; FUNDING.
(a) Credit Reform.--The cost of purchases of preferred stock and
other financial instruments made as capital investments under this Act
shall be determined as provided under the Federal Credit Reform Act of
1990 (2 U.S.C. 661 et seq.).
(b) Funds Made Available.--There are hereby authorized to be
appropriated, out of funds in the Treasury not otherwise appropriated,
such sums as may be necessary to pay the costs of $30,000,000,000 of
capital investments in eligible institutions, including the costs of
modifying such investments, and reasonable costs of administering the
program of making, holding, managing, and selling the capital
investments.
SEC. 10. TERMINATION AND CONTINUATION OF AUTHORITIES.
(a) Termination of Investment Authority.--The authority to make
capital investments in eligible institutions, including commitments to
purchase preferred stock or other instruments, provided under this Act
shall terminate 1 year after the date of enactment of this Act.
(b) Continuation of Other Authorities.--The authorities of the
Secretary in section 5 shall not be limited by the termination date in
subsection (a).
SEC. 11. PRESERVATION OF AUTHORITY.
Nothing in this Act may be construed to limit the authority of the
Secretary under any other provision of law.
SEC. 12. ASSURANCES.
(a) Small Business Lending Fund Separate From TARP.--The Small
Business Lending Fund Program is established as separate and distinct
from the Troubled Asset Relief Program established by the Emergency
Economic Stabilization Act of 2008. An institution shall not, by virtue
of a capital investment under the Small Business Lending Fund Program,
be considered a recipient of the Troubled Asset Relief Program.
(b) Change in Law.--If, after a capital investment has been made in
an eligible institution under the Program, there is a change in law
that modifies the terms of the investment or program in a materially
adverse respect for the eligible institution, the eligible institution
may, after consultation with the appropriate Federal banking agency for
the eligible institution, repay the investment without impediment.
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