[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5297 Reported in House (RH)]
Union Calendar No. 283
111th CONGRESS
2d Session
H. R. 5297
[Report No. 111-499]
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
May 27, 2010
Additional sponsors: Ms. Norton and Ms. Clarke
May 27, 2010
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on May 13,
2010]
_______________________________________________________________________
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,
TITLE I--SMALL BUSINESS LENDING FUND
SECTION 1. SHORT TITLE.
This title may be cited as the ``Small Business Lending Fund Act of
2010''.
SEC. 2. PURPOSE.
The purpose of this title 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 title:
(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 Initiative 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 consolidated assets of more than
$10,000,000,000, as so reported;
(B) any bank holding company which has total assets
of equal to or less than $10,000,000,000; and
(C) any savings and loan holding company which has
total assets of equal to or less than $10,000,000,000.
(10) Fund.--The term ``Fund'' means the Small Business
Lending Fund established by section 4(a)(1) of this title.
(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 title.
(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.--
(A) In general.--The term ``small business
lending'' means small business lending, as defined by
and reported in an eligible institution's quarterly
call report, of the following types:
(i) Commercial and industrial loans plus.
(ii) Owner-occupied nonfarm, nonresidential
real estate loans.
(iii) Loans to finance agricultural
production and other loans to farmers.
(iv) Loans secured by farmland.
(B) Treatment of holding companies.--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.
(16) Minority-owned and women-owned business.--The terms
``minority-owned business'' and ``women-owned business'' shall
have the meaning given the terms ``minority-owned business''
and ``women's business'', respectively, under section 21A(r)(4)
of the Federal Home Loan Bank Act (12 U.S.C. 1441A(r)(4)).
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 title.
(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 title.
(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.
(3) Proceeds used to pay down public debt.--All funds
received by the Secretary in connection with purchases made
pursuant to paragraph (1), including interest payments,
dividend payments, and proceeds from the sale of any financial
instrument, shall be paid into the general fund of the Treasury
for reduction of the public debt.
(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) Institutions with assets of $1,000,000,000 or
less.--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) Institutions with assets of more than
$1,000,000,000 and less than $10,000,000,000.--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) Treatment of holding companies.--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) Treatment of applicants that are institutions
controlled by holding companies.--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 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) Requirement to provide a small business lending
plan.--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) Ineligibility of institutions on fdic problem bank
list.--
(A) In general.--An eligible institution may not
receive any capital investment under the Program if--
(i) such institution is on the FDIC problem
bank list; or
(ii) such institution has been removed from
the FDIC problem bank list for less than 90
days.
(B) FDIC problem bank list defined.--For purposes
of this subparagraph, the term ``FDIC problem bank
list'' means the list of institutions with a current
rating of 4 or 5 under the Uniform Financial
Institutions Rating System, or such other list
designated by the Federal Deposit Insurance
Corporation.
(4) Incentives to lend.--
(A) Requirements on preferred stock and other
financial instruments.--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 the amount of
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 the amount of
small business lending relative to the
baseline--
(I) if the amount of small business
lending has increased by less than 2.5
percent, the dividend or interest rate
shall be 5 percent;
(II) if the amount of 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 the amount of 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 the amount of 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 the amount of small business
lending has increased by 10 percent or
greater, the dividend or interest rate
shall be 1 percent.
(B) Basis of initial rate.--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) Timing of rate adjustments.--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) Rate following initial 2-year period.--
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 4\1/2\-year period that begins on the
date of the investment. In the case where the amount of
small business 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 4\1/2\-year period that begins on
the date of the investment.
(E) Rate following initial 4\1/2\-year period.--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 4\1/2\-year period that begins on the date of the
capital investment under the Program.
(F) Limitation on rate reductions with respect to
certain amount.--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 a dollar amount of the
investment made by Treasury that is greater than the
dollar amount increase in the amount of small business
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) Rate adjustments for s corporation.--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.
(H) Repayment deadline.--The capital investment
received by an eligible institution under the Program
shall be repaid by the end of the 10-year period that
begins on the date of the capital investment under the
Program.
(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 title.
(6) Capital purchase program refinance.--
(A) In general.--The Secretary shall, in a manner
that the Secretary determines to be consistent with the
purposes of this title, 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.
(B) Prohibition on participation by non-paying cpp
participants.--Subparagraph (A) shall not apply to any
eligible institution that has ever missed a dividend
payment due under the CPP.
(7) Minority outreach.--The Secretary shall require
eligible institutions receiving capital investments under the
Program to provide outreach and advertising in the appropriate
language of the applicant pool describing the availability and
application process of receiving loans from the eligible
institution that are made possible by the Program through the
use of print, radio, television or electronic media outlets
which target organizations, trade associations, and individuals
that represent or work within or are members of minority
communities.
(8) 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 Fund in a manner
consistent with the purposes of this title.
(9) Minimum underwriting standards.--The appropriate
Federal banking agency for an eligible institution that
receives funds under the Program shall within 60 days issue
regulations defining minimum underwriting standards that must
be used for loans made by the eligible institution using such
funds.
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 title, 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, security broker or dealer, asset
manager, or investment adviser as a financial agent of the
Federal Government and such institution shall perform all such
reasonable duties related to this title 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 title, to perform reasonable duties
related to this title.
(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 title.
(5) Subject to section 4(b)(3), the Secretary may manage
any assets purchased under this title, 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 title, 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 title.
(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 title.
SEC. 6. CONSIDERATIONS.
In exercising the authorities granted in this title, 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 that are minority- and women-owned and that
also serve low- and moderate-income, minority, and other
underserved or rural communities;
(3) protecting and increasing American jobs;
(4) ensuring that all eligible institutions may apply to
participate in the program established under this title,
without discrimination based on geography;
(5) providing transparency with respect to use of funds
provided under this title;
(6) minimizing the cost to taxpayers of exercising the
authorities; and
(7) promoting and engaging in financial education to would-
be borrowers.
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 title;
(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, which shall include
participating institutions and amounts each institution has
received under the Program; and
(3) 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 detailing how eligible institutions
participating in the Program have used the funds such
institutions received under the Program.
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
title 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
title shall terminate 1 year after the date of enactment of this title.
(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 title 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.
SEC. 13. STUDY AND REPORT WITH RESPECT TO WOMEN-OWNED AND MINORITY-
OWNED BUSINESSES.
(a) Study.--The Secretary shall conduct a study to determine the
number of women-owned businesses and minority-owned businesses that
receive assistance as a result of the Program, including--
(1) efforts, including technical assistance and outreach
that institutions have employed under the Program to provide
loans to minority- and women-owned small businesses;
(2) loan applications received;
(3) loan applications approved; and
(4) and any other relevant data related to such
transactions to promote the purposes of the Program as the
Secretary may require.
(b) Report.--Not later than one year after the date of enactment of
this Act, the Secretary shall submit to Congress a report on the
results of the study conducted pursuant to subsection (a).
(c) Information Provided to the Secretary.--Eligible institutions
that participate in the Program shall provide the Secretary with such
information as the Secretary may require to carry out the study
required by this section.
TITLE II--STATE SMALL BUSINESS CREDIT INITIATIVE
SEC. 201. SHORT TITLE.
This title may be cited as the ``State Small Business Credit
Initiative Act of 2010''.
SEC. 202. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Appropriate federal banking agency.--The term
``appropriate Federal banking agency''--
(A) has the same meaning as in section 3 of the
Federal Deposit Insurance Act; and
(B) includes the National Credit Union
Administration Board in the case of any credit union
the deposits of which are insured in accordance with
the Federal Credit Union Act.
(2) Enrolled loan.--The term ``enrolled loan'' means a loan
made by a financial institution lender that is enrolled by a
participating State in an approved State capital access program
in accordance with this title.
(3) Federal contribution.--The term ``Federal
contribution'' means the portion of the contribution made by a
participating State to, or for the account of, an approved
State program that is made with Federal funds allocated to the
State by the Secretary under section 203.
(4) Financial institution.--The term ``financial
institution'' means any insured depository institution, insured
credit union, or community development financial institution,
as those terms are each defined in section 103 of the Riegle
Community Development and Regulatory Improvement Act of 1994.
(5) Participating state.--The term ``participating State''
means any State that has been approved for participation in the
Program under section 204.
(6) Program.--The term ``Program'' means the State Small
Business Credit Initiative established under this title.
(7) Qualifying loan or swap funding facility.--The term
``qualifying loan or swap funding facility'' means a
contractual arrangement between a participating State and a
private financial entity under which--
(A) the participating State delivers funds to the
entity as collateral;
(B) the entity provides funding from the
arrangement back to the participating State; and
(C) the full amount of resulting funding from the
arrangement, less any fees and other costs of the
arrangement, is contributed to, or for the account of,
an approved State program.
(8) Reserve fund.--The term ``reserve fund'' means a fund,
established by a participating State, dedicated to a particular
financial institution lender, for the purposes of--
(A) depositing all required premium charges paid by
the financial institution lender and by each borrower
receiving a loan under an approved State program from
that financial institution lender;
(B) depositing contributions made by the
participating State, including State contributions made
with Federal contributions; and
(C) covering losses on enrolled loans by disbursing
accumulated funds.
(9) State.--The term ``State'' means--
(A) a State of the United States;
(B) the District of Columbia, the Commonwealth of
Puerto Rico, the Commonwealth of Northern Mariana
Islands, Guam, American Samoa, and the United States
Virgin Islands;
(C) when designated by a State of the United
States, a political subdivision of that State that the
Secretary determines has the capacity to participate in
the Program; and
(D) under the circumstances described in section
204(d), a municipality of a State of the United States
to which the Secretary has given a special permission
under section 204(d).
(10) State capital access program.--The term ``State
capital access program'' means a program of a State that--
(A) uses public resources to promote private access
to credit; and
(B) meets the eligibility criteria in section
205(c).
(11) State other credit support program.--The term ``State
other credit support program''--
(A) means a program of a State that--
(i) uses public resources to promote
private access to credit;
(ii) is not a State capital access program;
and
(iii) meets the eligibility criteria in
section 206(c); and
(B) includes, collateral support programs, loan
participation programs, and credit guarantee programs.
(12) State program.--The term ``State program'' means a
State capital access program or a State other credit support
program.
(13) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
SEC. 203. FEDERAL FUNDS ALLOCATED TO STATES.
(a) Program Established; Purpose.--There is established the State
Small Business Credit Initiative (hereinafter in this title referred to
as the ``Program''), to be administered by the Secretary. Under the
Program, the Secretary shall allocate Federal funds to participating
States and make the allocated funds available to the participating
States as provided in this section for the uses described in this
section.
(b) Allocation Formula.--
(1) In general.--Not later than 30 days after the date of
enactment of this title, the Secretary shall allocate Federal
funds to participating States so that each State is eligible to
receive an amount equal to the average of the respective
amounts that the State--
(A) would receive under the 2009 allocation, as
determined under paragraph (2); and
(B) would receive under the 2010 allocation, as
determined under paragraph (3).
(2) 2009 allocation formula.--
(A) In general.--The Secretary shall determine the
2009 allocation by allocating Federal funds among the
States in the proportion that each such State's 2008
State employment decline bears to the aggregate of the
2008 State employment declines for all States.
(B) Minimum allocation.--The Secretary shall adjust
the allocations under subparagraph (A) for each State
to the extent necessary to ensure that no State
receives less than 0.9 percent of the Federal funds.
(C) 2008 state employment decline defined.--For
purposes of this paragraph and with respect to a State,
the term ``2008 State employment decline'' means the
excess (if any) of--
(i) the number of individuals employed in
such State determined for December 2007; over
(ii) the number of individuals employed in
such State determined for December 2008.
(3) 2010 allocation formula.--
(A) In general.--The Secretary shall determine the
2010 allocation by allocating Federal funds among the
States in the proportion that each such State's 2009
unemployment number bears to the aggregate of the 2009
unemployment numbers for all of the States.
(B) Minimum allocation.--The Secretary shall adjust
the allocations under subparagraph (A) for each State
to the extent necessary to ensure that no State
receives less than 0.9 percent of the Federal funds.
(C) 2009 unemployment number defined.--For purposes
of this paragraph and with respect to a State, the term
``2009 unemployment number'' means the number of
individuals within such State who were determined to be
unemployed by the Bureau of Labor Statistics for
December 2009.
(c) Availability of Allocated Amount.--The amount allocated by the
Secretary to each participating State under subsection (b) shall be
made available to the State as follows:
(1) Allocated amount generally to be available to state in
one-thirds.--
(A) In general.--The Secretary shall--
(i) apportion the participating State's
allocated amount into one-thirds;
(ii) transfer to the participating State
the first one-third when the Secretary approves
the State for participation under section 204;
and
(iii) transfer to the participating State
each successive one-third when the State has
certified to the Secretary that it has
expended, transferred, or obligated 80 percent
of the last transferred one-third for Federal
contributions to, or for the account of, State
programs.
(B) Authority to withhold pending audit.--The
Secretary may withhold the transfer of any successive
one-third pending results of a financial audit.
(C) Transfers contingent on inspector general
audits.--
(i) In general.--Before a transfer to a
participating State of the second one-third or
the last one-third, the Inspector General of
the Department of the Treasury shall carry out
an audit of the participating State's use of
amounts already received.
(ii) Penalty for misstatement.--Any
participating State that is found to have
intentionally misstated any report issued to
the Secretary under the Program shall be
ineligible to receive any additional funds
under the Program. Funds that had been
allocated or that would otherwise have been
allocated to such participating State shall be
paid into the general fund of the Treasury for
reduction of the public debt.
(iii) Municipalities.--For purposes of this
subparagraph, the term ``participating State''
shall include a municipality given special
permission to participate in the Program,
pursuant to section 204(d).
(2) Transferred amounts.--Each amount transferred to a
participating State under this section shall remain available
to the State until used by the State as permitted under
paragraph (3).
(3) Use of transferred funds.--Each participating State may
use funds transferred to it under this section only--
(A) for making Federal contributions to, or for the
account of, an approved State program;
(B) as collateral for a qualifying loan or swap
funding facility;
(C) in the case of the first one-third transferred,
for paying administrative costs incurred by the State
in implementing an approved State program in an amount
not to exceed 5 percent of that first one-third; or
(D) in the case of each successive one-third
transferred, for paying administrative costs incurred
by the State in implementing an approved State program
in an amount not to exceed 3 percent of that successive
one-third.
(4) Termination of availability of amounts not transferred
within 2 years of participation.--Any portion of a
participating State's allocated amount that has not been
transferred to the State under this section by the end of the
2-year period beginning on the date that the Secretary approves
the State for participation may be deemed by the Secretary to
be no longer allocated to the State and no longer available to
the State and shall be returned to the General Fund of the
Treasury.
(5) Definitions.--For purposes of this section--
(A) the term ``allocated amount'' means the total
amount of Federal funds allocated by the Secretary
under subsection (b) to the participating State; and
(B) the term ``one-third'' means--
(i) in the case of the first and second
one-thirds, an amount equal to 33 percent of a
participating State's allocated amount; and
(ii) in the case of the last one-third, an
amount equal to 34 percent of a participating
State's allocated amount.
SEC. 204. APPROVING STATES FOR PARTICIPATION.
(a) Application.--Any State may apply to the Secretary for approval
to be a participating State under the Program and to be eligible for an
allocation of Federal funds under the Program.
(b) General Approval Criteria.--The Secretary shall approve a State
to be a participating State, if--
(1) a specific department, agency, or political subdivision
of the State has been designated to implement a State program
and participate in the Program;
(2) all legal actions necessary to enable such designated
department, agency, or political subdivision to implement a
State program and participate in the Program have been
accomplished;
(3) the State has filed an application with the Secretary
for approval of a State capital access program under section
205 or approval as a State other credit support program under
section 206, in each case within the time period provided in
the respective section; and
(4) the State and the Secretary have executed an allocation
agreement that--
(A) conforms to the requirements of this title;
(B) ensures that the State program complies with
such national standards as are established by the
Secretary under section 209(a)(2);
(C) sets forth internal control, compliance, and
reporting requirements as established by the Secretary,
and such other terms and conditions necessary to carry
out the purposes of this title, including an agreement
by the State to allow the Secretary to audit State
programs;
(D) requires that the State program be fully
positioned, within 90 days of the State's execution of
the allocation agreement with the Secretary, to act on
providing the kind of credit support that the State
program was established to provide; and
(E) includes an agreement by the State to deliver
to the Secretary, and update annually, a schedule
describing how the State intends to apportion among its
State programs the Federal funds allocated to the
State.
(c) Contractual Arrangements for Implementation of State
Programs.--A State may be approved to be a participating State, and be
eligible for an allocation of Federal funds under the Program, if the
State has contractual arrangements for the implementation and
administration of its State program with--
(1) an existing, approved State program administered by
another State; or
(2) an authorized agent of, or entity supervised by, the
State, including for-profit and not-for-profit entities.
(d) Special Permission.--
(1) Circumstances when a municipality may apply directly.--
If a State does not, within 60 days after the date of enactment
of this title, file with the Secretary a notice of its intent
to apply for approval by the Secretary of a State program or
within 9 months after the date of enactment of this title, file
with the Secretary a complete application for approval of a
State program, the Secretary may grant to municipalities of
that State a special permission that will allow them to apply
directly to the Secretary without the State for approval to be
participating municipalities.
(2) Timing requirements applicable to municipalities
applying directly.--To qualify for the special permission, a
municipality of a State must, within 12 months after the date
of enactment of this title, file with the Secretary a complete
application for approval by the Secretary of a State program.
(3) Notices of intent and applications from more than 1
municipality.--A municipality of a State may combine with 1 or
more other municipalities of that State to file a joint notice
of intent to file and a joint application.
(4) Approval criteria.--The general approval criteria in
paragraphs (2) and (4) shall apply.
(5) Allocation to municipalities.--
(A) If more than 3.--If more than 3 municipalities,
or combination of municipalities as provided in
paragraph (3), of a State apply for approval by the
Secretary to be participating municipalities under this
subsection, and the applications meet the approval
criteria in paragraph (4), the Secretary shall allocate
Federal funds to the 3 municipalities with the largest
populations.
(B) If 3 or fewer.--If 3 or fewer municipalities,
or combination of municipalities as provided in
paragraph (3), of a State apply for approval by the
Secretary to be participating municipalities under this
subsection, and the applications meet the approval
criteria in paragraph (4), the Secretary shall allocate
Federal funds to each applicant municipality or
combination of municipalities.
(6) Apportionment of allocated amount among participating
municipalities.--If the Secretary approves municipalities to be
participating municipalities under this subsection, the
Secretary shall apportion the full amount of the Federal funds
that are allocated to that State to municipalities that are
approved under this subsection in amounts proportionate to the
population of those municipalities, based on the most recent
available decennial census.
(7) Approving state programs for municipalities.--If the
Secretary approves municipalities to be participating
municipalities under this subsection, the Secretary shall take
into account the additional considerations in section 206(d) in
making the determination under section 205 or 206 that the
State program or programs to be implemented by the
participating municipalities, including a State capital access
program, is eligible for Federal contributions to, or for the
account of, the State program.
SEC. 205. APPROVING STATE CAPITAL ACCESS PROGRAMS.
(a) Application.--A participating State that establishes a new, or
has an existing, State capital access program that meets the
eligibility criteria in subsection (c) may apply to Secretary to have
the State capital access program approved as eligible for Federal
contributions to the reserve fund.
(b) Approval.--The Secretary shall approve such State capital
access program as eligible for Federal contributions to the reserve
fund if--
(1) within 60 days after the date of enactment of this
title, the State has filed with the Secretary a notice of
intent to apply for approval by the Secretary of a State
capital access program;
(2) within 9 months after the date of enactment of this
title, the State has filed with the Secretary a complete
application for approval by the Secretary of a capital access
program;
(3) the State satisfies the requirements of subsections (a)
and (b) of section 204; and
(4) the State capital access program meets the eligibility
criteria in subsection (c).
(c) Eligibility Criteria for State Capital Access Programs.--For a
State capital access program to be approved under this section, it must
be a program of the State that--
(1) provides portfolio insurance for business loans based
on a separate loan-loss reserve fund for each financial
institution;
(2) requires insurance premiums to be paid by the financial
institution lenders and by the business borrowers to the
reserve fund to have their loans enrolled in the reserve fund;
(3) provides for contributions to be made by the State to
the reserve fund in amounts at least equal to the sum of the
amount of the insurance premium charges paid by the borrower
and the financial institution to the reserve fund for any newly
enrolled loan; and
(4) provides its portfolio insurance solely for loans that
meet both the following requirements:
(A) The borrower has 500 employees or less at the
time that the loan is enrolled in the Program.
(B) The loan amount does not exceed $5,000,000.
(d) Federal Contributions to Approved State Capital Access
Programs.--A State capital access program approved under this section
will be eligible for receiving Federal contributions to the reserve
fund in an amount equal to the sum of the amount of the insurance
premium charges paid by the borrowers and by the financial institution
to the reserve fund for loans that meet the requirements in subsection
(c)(4). A participating State may use the Federal contribution to make
its contribution to the reserve fund of an approved State capital
access program.
(e) Minimum Program Requirements for State Capital Access
Programs.--The Secretary shall, by regulation or other guidance,
prescribe Program requirements that meet the following minimum
requirements:
(1) Experience and capacity.--The participating State shall
determine for each financial institution that participates in
the State capital access program, after consultation with the
appropriate Federal banking agency or, in the case of a
financial institution that is a non depository community
development financial institution, the Community Development
Financial Institution Fund, that the financial institution has
sufficient commercial lending experience and financial and
managerial capacity to participate in the approved State
capital access program. The determination by the State shall
not be reviewable by the Secretary.
(2) Investment authority.--Subject to applicable State law,
the participating State may invest, or cause to be invested,
funds held in a reserve fund by establishing a deposit account
at the financial institution lender in the name of the
participating State. In the event that funds in the reserve
fund are not deposited in such an account, such funds shall be
invested in a form that the participating State determines is
safe and liquid.
(3) Loan terms and conditions to be determined by
agreement.--A loan to be filed for enrollment in an approved
State capital access program may be made with such interest
rate, fees, and other terms and conditions, and the loan may be
enrolled in the approved State capital access program and
claims may be filed and paid, as agreed upon by the financial
institution lender and the borrower, consistent with applicable
law.
(4) Lender capital at-risk.--A loan to be filed for
enrollment in the State capital access program must require the
financial institution lender to have a meaningful amount of its
own capital resources at risk in the loan.
(5) Premium charges minimum and maximum amounts.--The
insurance premium charges payable to the reserve fund by the
borrower and the financial institution lender shall be
prescribed by the financial institution lender, within minimum
and maximum limits that require that the sum of the insurance
premium charges paid in connection with a loan by the borrower
and the financial institution lender may not be less than 2
percent nor more than 7 percent of the amount of the loan
enrolled in the approved State capital access program.
(6) State contributions.--In enrolling a loan in an
approved State capital access program, the participating State
may make a contribution to the reserve fund to supplement
Federal contributions made under this Program.
(7) Loan purpose.--
(A) Particular loan purpose requirements and
prohibitions.--In connection with the filing of a loan
for enrollment in an approved State capital access
program, the financial institution lender--
(i) shall obtain an assurance from each
borrower that--
(I) the proceeds of the loan will
be used for a business purpose;
(II) the loan will not be used to
finance such business activities as the
Secretary, by regulation, may proscribe
as prohibited loan purposes for
enrollment in an approved State capital
access program; and
(III) the borrower is not--
(aa) an executive officer,
director, or principal
shareholder of the financial
institution lender;
(bb) a member of the
immediate family of an
executive officer, director, or
principal shareholder of the
financial institution lender;
or
(cc) a related interest of
any such executive officer,
director, principal
shareholder, or member of the
immediate family;
(ii) shall provide assurances to the
participating State that the loan has not been
made in order to place under the protection of
the approved State capital access program prior
debt that is not covered under the approved
State capital access program and that is or was
owed by the borrower to the financial
institution lender or to an affiliate of the
financial institution lender;
(iii) shall not allow the enrollment of a
loan to a borrower that is a refinancing of a
loan previously made to that borrower by the
financial institution lender or an affiliate of
the financial institution lender; and
(iv) may include additional restrictions on
the eligibility of loans or borrowers that are
not inconsistent with the provisions and
purposes of this title, including compliance
with all applicable Federal and State laws,
regulations, ordinances, and Executive orders.
(B) Definitions.--For purposes of this subsection,
the terms ``executive officer'', ``director'',
``principal shareholder'', ``immediate family'', and
``related interest'' refer to the same relationship to
a financial institution lender as the relationship
described in part 215 of title 12 of the Code of
Federal Regulations, or any successor to such part.
SEC. 206. APPROVING COLLATERAL SUPPORT AND OTHER INNOVATIVE CREDIT
ACCESS AND GUARANTEE INITIATIVES FOR SMALL BUSINESSES AND
MANUFACTURERS.
(a) Application.--A participating State that establishes a new, or
has an existing, credit support program that meets the eligibility
criteria in subsection (c) may apply to the Secretary to have the State
other credit support program approved as eligible for Federal
contributions to, or for the account of, the State program.
(b) Approval.--The Secretary shall approve such State other credit
support program as eligible for Federal contributions to, or for the
account of, the program if--
(1) the Secretary determines that the State satisfies the
requirements of paragraphs (1) through (3) of section 205(b);
(2) the Secretary determines that the State other credit
support program meets the eligibility criteria in subsection
(c);
(3) the Secretary determines the State other credit support
program to be eligible based on the additional considerations
in subsection (d); and
(4) within 9 months after the date of enactment of this
title, the State has filed with Treasury a complete application
for Treasury approval.
(c) Eligibility Criteria for State Other Credit Support Programs.--
For a State other credit support program to be approved under this
section, it must be a program of the State that--
(1) can demonstrate that, at a minimum, 1 dollar of public
investment by the State program will cause and result in 1
dollar of new private credit;
(2) can demonstrate a reasonable expectation that, when
considered with all other State programs of the State, such
State programs together have the ability to use amounts of new
Federal contributions to, or for the account of, all such
programs in the State to cause and result in amounts of new
small business lending at least 10 times the new Federal
contribution amount;
(3) for those State other credit support programs that
provide their credit support through 1 or more financial
institution lenders, requires the financial institution lenders
to have a meaningful amount of their own capital resources at
risk in their small business lending; and
(4) extends credit support that--
(A) targets an average borrower size of 500
employees or less;
(B) does not extend credit support to borrowers
that have more than 750 employees;
(C) targets support towards loans with an average
principal amount of $5,000,000 or less; and
(D) does not extend credit support to loans that
exceed a principal amount of $20,000,000.
(d) Additional Considerations.--In making a determination that a
State other credit support program is eligible for Federal
contributions to, or for the account of, the State program, the
Secretary shall take into account the following additional
considerations:
(1) The anticipated benefits to the State, its businesses,
and its residents to be derived from the Federal contributions
to, or for the account of, the approved State other credit
support program, including the extent to which resulting small
business lending will expand economic opportunities.
(2) The operational capacity, skills, and experience of the
management team of the State other credit support program.
(3) The capacity of the State other credit support program
to manage increases in the volume of its small business
lending.
(4) The internal accounting and administrative controls
systems of the State other credit support program, and the
extent to which they can provide reasonable assurance that
funds of the State program are safeguarded against waste, loss,
unauthorized use, or misappropriation.
(5) The soundness of the program design and implementation
plan of the State other credit support program.
(e) Federal Contributions to Approved State Other Credit Support
Programs.--A State other credit support program approved under this
section will be eligible for receiving Federal contributions to, or for
the account of, the State program in an amount consistent with the
schedule describing the apportionment of allocated Federal funds among
State programs delivered by the State to the Secretary under the
allocation agreement.
(f) Minimum Program Requirements for State Other Credit Support
Programs.--
(1) Fund to prescribe.--The Secretary shall, by regulation
or other guidance, prescribe Program requirements for approved
State other credit support programs.
(2) Considerations for fund.--In prescribing minimum
Program requirements for approved State other credit support
programs, the Secretary shall take into consideration, to the
extent the Secretary determines applicable and appropriate, the
minimum Program requirements for approved State capital access
programs in section 205(e).
SEC. 207. REPORTS.
(a) Quarterly Use-of-funds Report.--
(1) In general.--Not later than 30 days after the beginning
of each calendar quarter, beginning after the first full
calendar quarter to occur after the date the Secretary approves
a State for participation, the participating State shall submit
to the Secretary a report on the use of Federal funding by the
participating State during the previous calendar quarter.
(2) Report contents.--The report shall--
(A) indicate the total amount of Federal funding
used by the participating State;
(B) include a certification by the participating
State that--
(i) the information provided in accordance
with subparagraph (A) is accurate;
(ii) funds continue to be available and
legally committed to contributions by the State
to, or for the account of, approved State
programs, less any amount that has been
contributed by the State to, or for the account
of, approved State programs subsequent to the
State being approved for participation in the
Program; and
(iii) the participating State is
implementing its approved State program or
programs in accordance with this title and
regulations issued pursuant to section 210.
(b) Annual Report.--Not later than March 31 of each year, beginning
March 31, 2011, each participating State shall submit to the Secretary
an annual report that shall include the following information:
(1) The number of borrowers that received new loans
originated under the approved State program or programs after
the State program was approved as eligible for Federal
contributions.
(2) The total amount of such new loans.
(3) Breakdowns by industry type, loan size, annual sales,
and number of employees of the borrowers that received such new
loans.
(4) The zip code of each borrower that received such a new
loan.
(5) Such other data as the Secretary, in the Secretary's
sole discretion, may require to carry out the purposes of the
Program.
(c) Form.--The reports and data filed pursuant to subsections (a)
and (b) shall be in such form as the Secretary, in the Secretary's sole
discretion, may require.
(d) Termination of Reporting Requirements.--The requirement to
submit reports under subsections (a) and (b) shall terminate for a
participating State with the submission of the completed reports due on
the first March 31 to occur after 5 complete 12-month periods after the
State is approved by the Secretary to be a participating State.
SEC. 208. REMEDIES FOR STATE PROGRAM TERMINATION OR FAILURES.
(a) Remedies.--
(1) In general.--If any of the events listed in paragraph
(2) occur, the Secretary, in the Secretary's discretion, may--
(A) reduce the amount of Federal funds allocated to
the State under the Program; or
(B) terminate any further transfers of allocated
amounts that have not yet been transferred to the
State.
(2) Causal events.--The events referred to in paragraph (1)
are--
(A) termination by a participating State of its
participation in the Program;
(B) failure on the part of a participating State to
submit complete reports under section 207 on a timely
basis; or
(C) noncompliance by the State with the terms of
the allocation agreement between the Secretary and the
State.
(b) Deallocated Amounts to Be Reallocated.--If, after 13 months,
any portion of the amount of Federal funds allocated to a participating
State is deemed by the Secretary to be no longer allocated to the State
after actions taken by the Secretary under subsection (a)(1), the
Secretary shall reallocate that portion among the participating States,
excluding the State whose allocated funds were deemed to be no longer
allocated, as provided in section 203(b).
SEC. 209. IMPLEMENTATION AND ADMINISTRATION.
(a) General Authorities and Duties.--The Secretary shall--
(1) consult with the Administrator of the Small Business
Administration and the appropriate Federal banking agencies on
the administration of the Program;
(2) establish minimum national standards for approved State
programs;
(3) provide technical assistance to States for starting
State programs and generally disseminate best practices;
(4) manage, administer, and perform necessary program
integrity functions for the Program; and
(5) ensure adequate oversight of the approved State
programs, including oversight of the cash flows, performance,
and compliance of each approved State program.
(b) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary, out of funds in the Treasury not
otherwise appropriated, $2,000,000,000 to carry out the Program,
including to pay reasonable costs of administering the Program.
(c) Termination of Secretary's Program Administration Functions.--
The authorities and duties of the Secretary to implement and administer
the Program shall terminate at the end of the 7-year period beginning
on the date of enactment of this title.
SEC. 210. REGULATIONS.
The Secretary, in consultation with the Administrator of the Small
Business Administration, shall issue such regulations and other
guidance as the Secretary determines necessary or appropriate to
implement this title including, but not limited to, to define terms, to
establish compliance and reporting requirements, and such other terms
and conditions necessary to carry out the purposes of this title.
SEC. 211. 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 use of funds made available 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, as such term is defined under
section 3(1), containing the results of such audit.
Union Calendar No. 283
111th CONGRESS
2d Session
H. R. 5297
[Report No. 111-499]
_______________________________________________________________________
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.
_______________________________________________________________________
May 27, 2010
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed