Congressional Record, Volume 142 Issue 120 (Thursday, September 5, 1996)

[Congressional Record Volume 142, Number 120 (Thursday, September 5, 1996)]
[House]
[Pages H10078-H10089]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

SMALL BUSINESS PROGRAMS IMPROVEMENT ACT OF 1996

The SPEAKER pro tempore. Pursuant to House Resolution 516 and rule
XXIII, the Chair declares the House in the Committee of the Whole House
on the State of the Union for consideration of the bill, H.R. 3719.

{time} 1408

In the Committee of the Whole

Accordingly the House resolved itself into the Committee of the Whole
House on the State of the union for the consideration of the bill (H.R.
3719) to amend the Small Business Act and Small Business Investment Act
of 1958, with Mr. Collins of Georgia in the chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the rule, the bill is considered as having
been read the first time.
Under the rule, the gentlewoman from Kansas [Mrs. Meyers] and the
gentleman from New York [Mr. LaFalce] each will control 30 minutes.
The Chair recognizes the gentlewoman from Kansas [Mrs. Meyers].
Mrs. MEYERS of Kansas. Mr. Chairman, I yield myself such time as I
may consume.
Mr. Chairman, I rise in strong support of H.R. 3719, the Small
Business Programs Improvement Act of 1996, and I urge my colleagues to
support this bill which is pro-small business and pro-government
efficiency.
The Committee on Small Business reported out H.R. 3719 on July 18,
1996, by a unanimous vote of the Committee after intensive bipartisan
work. Mr. LaFalce, and I spent many hours together working out the
details of the provisions. I am pleased to say that we are able to move
H.R. 3719 through the Committee in an atmosphere of bipartisan
cooperation.
The overall theme of this legislation, is better management of the
loan programs. SBA guaranteed loans provide approximately $10 billion
in life-giving capital to small businesses every year. The 7(a)
Guaranteed Loan Program, the largest loan program at the SBA, will
provide over $7 billion in financing to small businesses this year. As
volume in the loan programs has increased, SBA staffing has decreased.
I believe these events can be compatible, but only if the SBA relies on
its private sector partners to carry out the day-to-day operations of
making, servicing, and liquidating loans.

SBA does not have the manpower or resources to be a retail operation.
They cannot efficiently process every loan, or handle the liquidation
of each loan that goes into default. This is clear from the new subsidy
rates--rates that have dramatically increased due to low recovery rates
on liquidated loans. The time period for liquidating loans is
substantially longer than the average in the private sector. It is time
for the SBA to move the liquidation function to the private sector,
where our bank and nonbank lending partners conduct these types of
actions everyday, and harness those efficiencies. SBA must assume the
role of monitoring our lending partners, not trying to recreate
operations that are done faster and better in the private sector.
The Committee on Small Business realized the SBA's limitations and
took decisive action in this bill, H.R. 3719, to turn more functions of
SBA lending programs over to the private sector. In the 7(a), 504, and
disaster loan programs, pilot projects have been created, giving
lenders the freedom to liquidate defaulted loans and to service
disaster loans. This should increase our returns, and improve service
delivery in our loan programs. SBA simply cannot handle the load
currently on its plate, as reflected in the increased subsidy rates.
Other critical provisions in H.R. 3719 are those dealing with the 504
or Certified Development Company Program. As you may know, when the
President released his budget for fiscal year 1997, we were hit with
dramatically higher estimates of the subsidy rates for the 504 and 7(a)
guaranteed loan programs. Last year, the Committee on Small Business
moved legislation which reduced the subsidy rate in the 504 program to
zero, making it a self-financed program which requires no appropriated
funds. While the committee was disappointed and frustrated by the SBA's
and OMB's inability to notify us in a timely way about these new
estimates, we are, nonetheless, committed to returning the 504 program
to a zero subsidy.
A combination of new fees, to be shared by the lenders, the certified
development companies, and the borrowers, and several program
management improvements in H.R. 3719, including the liquidation pilot
project, result in the maintenance of a zero subsidy rate for the 504
program. It is vital that this lending program, which provides long-
term financing for expanding small businesses to purchase new physical
space or equipment, continue to help small businesses and our economy
grow. As my colleagues probably know, the 504 program is the only SBA
lending program with a job creation requirement. While no one likes to
place additional fees on small business borrowers, that is the only way
to keep this important program going, as no funds were requested by the
administration, or appropriated for the 504 program for fiscal year
1997.
H.R. 3719 also addresses some management issues in the 7(a) program,
and requires an extensive, private sector study of the subsidy rate
calculations done by SBA and the OMB. I hope this study will unlock the
mysteries of the OMB subsidy rate assumptions and prevent future year
surprises in this calculation. As with the 504 program, the committee
has moved more of the day-to-day responsibilities for the loan programs
to our most trusted private sector partners, our preferred lenders or
PLP's. Under H.R. 3719, the preferred lenders will be provided with the
full authority and responsibility to liquidate their own loans. The SBA
has delegated many responsibilities to the PLP's, but has retained most
of the liquidation functions with the agency. In addition, certified
lenders [CLP's] will be able to conduct their own liquidations, with
the assistance and oversight of the SBA. The committee believes the
private sector may be able to perform this function faster and more
efficiently, maximizing returns to the Government.
In addition, the committee has required that the Low Documentation or
Low Doc Program, which is an abbreviated form for the borrower seeking
a guaranteed loan of $100,000 or less, be conducted only by PLP's,
CLP's, or lenders with significant small business lending experience.
This program, which was a pilot initiated by the SBA, has proven to be
very popular among borrowers and banks, alike. However, the committee
has received a good deal of anecdotal evidence suggesting that many
lenders who have little or no small business lending experience, and no
experience with SBA loans, are doing large volumes of low doc loans. As
the Low Doc Program now comprises about 25 percent of the 7(a) program
volume, the committee felt it important to act to preserve the
integrity of SBA's own regulations, which stipulate that low doc is for
use by our most experienced lenders. The committee also places a
limitation on any new pilot programs. The administration may experiment
and try out new ideas and concepts to meet small business' needs.
However, no pilot may comprise more than 10 percent of the 7(a) program
volume. As the committee has seen, the program's subsidy rate is very
sensitive to changes in the portfolio composition. Any pilot deemed
successful can be statutorily created through the legislative process.
Other provisions in the bill continue to echo the theme of more
reliance on the private sector to carry out the functions of SBA
programs. We increase slightly the interest rate on disaster loans,
from a formula based upon one-half of the Treasury rate for 30 year
loans to three-fourths of Treasury. This increase will lower the
subsidy rate from 16.5 percent to approximately 12.3 percent, according
to CBO. This slight adjustment will continue to provide disaster
victims a real low-cost, long-term loan for disaster recovery, while
stretching the taxpayer dollars needed to fund this program a lot
further. H.R. 3719 also requires the SBA to contract out to private
entities the servicing of 10 percent of the loans in our disaster
portfolio. This pilot should

[[Page H10079]]

show that the private sector can perform this function at less cost
than the SBA and, hopefully, lead to a complete contracting out of this
function.
Finally, H.R. 3719 reauthorizes the Small Business Competitiveness
Demonstration Program. This program eliminates small business set-
asides in four categories of industry, as long as small business
participation in these industries are at least 40 percent. This
innovative demonstration program has worked well, allowing all
businesses to compete for Government contracts on an equal footing,
without locking small business out of the process, or into a certain
number or type of projects. Our bill does require extensive reporting
on the progress of this program, to ensure that it is not operating to
small businesses detriment.
Mr. Chairman, there are a lot of important program improvements in
H.R. 3719, improvements that will result in better service from the
Federal Government for small business. But more importantly, H.R. 3719
will preserve essential long-term lending programs for small business.
The Committee on Small Business is pleased to be able to bring this
legislation before the House this week, legislation which has been
endorsed by such groups as the U.S. Chamber of Commerce, the National
Association of Certified Development Companies, the National
Association of Government Guaranteed Lenders, and the Independent
Bankers Association of America. We will be doing a great service to the
small businesses of our Nation, and to the taxpayer, by enacting H.R.
3719, and I urge my colleagues to strongly support this measure.

{time} 1415

Mr. Chairman, I reserve the balance of my time.
Mr. LaFALCE. Mr. Chairman, I yield myself such time as I may consume.
(Mr. LaFALCE asked and was given permission to revise and extend his
remarks.)
Mr. LaFALCE Mr. Chairman, I generally support the provisions of this
bill, the Small Business Programs Improvement Act of 1996.
As originally introduced, there were a number of problems with the
bill. However, our gracious Chair, Mrs. Meyers, delayed official
committee action on the bill, thereby facilitating a number of private
discussions. The result was the offering of joint amendments in
committee which were agreed to on a bipartisan basis.
Since then, we have continued our negotiations which have now been
finalized with a manager's amendment. As further amended with this
amendment, this legislation has been greatly improved and deserves the
support of the membership.
I appreciate the consideration of the committee, and its Chair, Mrs.
Meyers, in examining the matters raised by me and other members of the
minority.
I also want to note at this point that I have enjoyed working with
Chair Meyers during the past 2 years. I do want to note,
parenthetically, that I enjoyed working with her more during the 103rd
Congress when she was the ranking minority member, but she has been a
true gentle lady during this Congress and has made my transition to
that role as painless as possible.
On behalf of the minority Members of the Committee, I want to wish
her and her husband the best of wishes in the future years. Jan, enjoy
your well-earned retirement.
Mr. Chairman, this is a bill which is necessary. Without the fee
increases in the Certified Development Company Program, there would be
no program next year. Thus I reluctantly support the fee proposals
because the alternative would be much worse.

The bill also extends several expiring programs this year, and more
importantly authorizes the continuation of all SBA programs next year.
Members are certainly aware how difficult it is to enact an
authorization bill in the first few months of a Congress, and this bill
eliminates that problem.
I also support a number of the pilot programs in the bill. I am not
one who believes that the private sector can do everything better and
at less cost, as some argue.
I am willing to have a realistic and meaningful comparison of the
results when loan functions are handled by private sector contractors
as compared to Government employees. I believe that Federal employees
are very dedicated and will prevail in this type of comparison. But it
is appropriate to perform the pilot tests.
I also want to point out that previously I expressed concern about
the amount of 7(a) loan guarantees which will be made available next
year.
It is my understanding that the proposed Federal funding, when added
to funds expected to be unused this year, will result in a 7(a) program
level next year of $6.5 billion to $7 billion.
Originally, most projections were that demand would exceed this
amount probably by $2 billion. It now appears, however, that usage of
the program is below prior projections this year.
Also, the other body has proposed additional Federal funding which
will augment the size of the program.
Thus I am now concluding that there may be no necessity to increase
fees for this program. This is not certainty, however, and I caution my
colleagues that there may be a shortage of loan money next year.
I know of no opposition to the bill, and I compliment Mrs. Meyers for
her work and that of her staff.
Mr. Chairman, I reserve the balance of my time.
Mrs. MEYERS of Kansas. Mr. Chairman, I yield 1 minute to the
gentleman from Massachusetts [Mr. Torkildsen].
Mr. TORKILDSEN. Mr. Chairman, I thank my colleague and friend for
yielding this time to me very briefly to speak in favor of the Small
Business Improvement Act, and I want to applaud her diligence and the
ranking minority member's diligence in working out this bill. I will
not repeat what has already been said because it has been fully
articulated.
I did want to rise today though to pay special appreciation to my
colleague and friend, the gentlewoman from Kansas [Mrs. Meyers], for
all the work she has done. She has been a tireless advocate of small
business throughout the United States, and she understands that that is
where the future of our economy is. We are going to miss her sincerely,
but I think I wanted to speak for all the Members and wish her well in
her future endeavors and say ``Thank you for all the work you have done
for small business in America. We will always be indebted to you.''
Mr. LaFALCE. Mr. Chairman, I yield 4 minutes to the gentleman from
Ohio [Mr. Traficant].
Mr. TRAFICANT. Mr. Chairman, I want to thank the distinguished
ranking member, and I too want to lend my voice to a classmate of mine
that will be leaving us, the gentlewoman from Kansas [Mrs. Meyers]. We
came in here together, and she has been an absolute gentlewoman all the
way through, and we are proud to serve with the gentlewoman, and, no,
we are not going out together after this or anything, but I mean that.
I do not think words can say enough.
I am rising today about an issue that deals with the 504 program and
some perceptions and guesstimates by the OMB that I think are
troublesome and could be problematic, and I will be offering an
amendment in this regard, and I am glad to have the support of the
ranking member, and I want to explain it briefly.
For example, the 504 program has been very cost effective. It spurred
the economies of Ohio and the Nation, and over the past 10 years over
$5 billion in 504 program loans have helped create over half a million
jobs, more than 47,000 in Ohio alone, Mr. Chairman. But the recent OMB
evaluation will severely undermine the viability of this particular
program. In my opinion, the evaluation underestimates the program's
strength and overestimates its weaknesses.
Now Members of the Ohio delegation, both Democrat and Republican,
have written in fact to Mr. Jacob Lew, Acting Director of OMB, and we
cited these particular cases.
The Traficant amendment would basically say that it is the sense of
Congress that the subsidy models prepared by OMB relative to loan
programs sponsored by the Small Business Administration have a tendency
to overestimate potential risks of loss and overemphasize historical
losses that may be unique or not truly reflective of the success of the
program as a whole.
So consequently what the amendment does, it mandates the independent
study in section 103(h) of this bill

[[Page H10080]]

with hopes of placing it in the bill, of improving the ability of OMB
to more accurately reflect the budgetary implications of some of these
programs that have had a great effect on revitalization of our Nation.
So with that, I just wanted to let the Committee know that we have
been working on this for some time and this is a vehicle which, in
fact, can accommodate our concerns.
The Members from Ohio that signed on with me were: Dave Hobson,
Sherrod Brown, Steven LaTourette, Thomas Sawyer, Martin Hoke, Marcy
Kaptur, and Robert Ney. So this has already been sent, it is a
bipartisan move, we in Ohio are concerned. We think it is valid for the
Nation and it does not in fact change anything in the bill. It supports
that language which is in the bill and will clarify that concern we
have.
So with that I want to thank the gentleman from New York [Mr.
LaFalce] for the time, and I hope for consideration.

{time} 1430

Mr. LaFALCE. Mr. Chairman, I yield myself such time as I may consume,
and would like to associate myself with the remarks of the gentleman
who represents the second best Air Reserve base in the United States.
Mrs. MEYERS of Kansas. Mr. Chairman, I yield such time as he may
consume to the gentleman from Missouri [Mr. Talent].
Mr. TALENT. Mr. Chairman, I thank the distinguished chair of the
Committee on Small Business for yielding to me.
Before I engage the gentleman from New York [Mr. LaFalce] and the
gentleman from Texas [Mr. Bentsen] in a colloquy, I would just like to
add my remarks to those of my colleagues, complimenting the
distinguished chair for her excellent leadership. There is no stronger
advocate for small business in the Congress, but what has really been
extraordinary is the gentle firmness with which she has led the
committee in the last year and a half. It has made it just a pleasure
to serve on the committee with her. I want to wish her all the best in
her future endeavors. I would thank her again for yielding for this
colloquy.
Mr. Chairman, I would like to clarify our intent with respect to the
language in this bill dealing with securitization. This provision was
dealt with extensively during the committee markup of H.R. 3719.
Between the gentleman from Texas [Mr. Bentsen] and the gentleman from
New York [Mr. LaFalce] the distinguished ranking member of the
committee, and myself.
It is my understanding this provision grants SBA the authority, if
they deem necessary to exercise it, to protect the agency's interests
by requiring lenders to retain exposure of up to 10 percent of the
loans being securitized. This in no way mandates the holdback or
exposure requirement in all cases.
I would like to ask the gentleman from New York if that indeed is his
understanding.
Mr. LaFALCE. Mr. Chairman, will the gentleman yield?
Mr. TALENT. I yield to the gentleman from New York.
Mr. LaFALCE. Yes, Mr. Chairman, the permissive nature of the
amendment is reflected in the manager's amendment that will be offered
shortly.
Mr. BENTSEN. Mr. Chairman, will the gentleman yield?
Mr. TALENT. I yield to the gentleman from Texas.
Mr. BENTSEN. The provision also states, Mr. Chairman, that any
holdback or exposure requirement should be applied uniformly to both
banks and nonbanks alike, thereby ending the prohibition on banks for
selling the nonguaranteed portion of certain SBA loans, but also
provides the SBA the discretion to accept alternative risk retention
provisions.
It is my understanding that acceptable alternative risk retention
provisions such as, but not limited to, the reserves required to
achieve an investment grade rating would be applied on a lender-by-
lender basis based on the structure of the securitization and the
historical loan performance of the lender. Is that correct?
Mr. LaFALCE. That is very correct, Mr. Chairman. The manager's
amendment explicitly permits alternative risk retention measures and
the lender-by-lender application of this requirement is also reflected
in the committee report that accompanies this bill.
I might want to add that it was precisely because of the arguments
advanced by the gentleman from Missouri [Mr. Talent] and the gentleman
from Texas [Mr. Bentsen] that the committee report language embodied
basically the arguments that they advanced during the markup, and the
manager's amendment makes those technical changes to ensure that their
wishes and desires were fully accommodated, and the language of the
report was fully accommodated.
We are especially grateful, I think, too, for the real-life
experience that the gentleman from Texas [Mr. Bentsen] brought to the
committee deliberations on this issue, because of his experience with
securitization on Wall Street. His experience was invaluable.
Mr. TALENT. Mr. Chairman, I reclaim my time to continue the colloquy,
and also add my compliments to the gentleman from Texas [Mr. Bentsen].
He does have real-life experience in this area.
It is my understanding these provisions are not intended to impair
the future use of securitization structures already in the market, and
approved by SBA as providing adequate protection to the agency, that
have proven effective in expanding capital availability.
I would ask the gentleman from New York [Mr. LaFalce] if that is
indeed correct.
Mr. LaFALCE. If the gentleman will continue to yield, Mr. Chairman,
yes, and this too was discussed in the markup and was also reflected in
the committee report.
Mr. BENTSEN. Mr. Chairman, if the gentleman will continue to yield, I
thank the gentleman for his assistance in this issue. We worked closely
to correct it so it would not become burdensome and it would create and
expand capital available to small businesses.
I thank the gentleman from Missouri [Mr. Talent] for his work on
this, as well, and for bringing it to the forefront. I look forward to
working in a bipartisan fashion in the future towards establishing a
level playing field between depository institutions and nonbank
financial institutions in their efforts to supply needed capital to the
small business community.
Mr. TALENT. Mr. Chairman, I thank the gentleman from New York [Mr.
LaFalce] for helping to clarify the securitization issue, an issue that
is critically important to increasing the pool of capital available to
small businesses. I also look forward to continuing efforts to foster
an efficient securitization market for small business loans.
Mr. LaFALCE. Mr. Chairman, I yield 2 minutes to the gentlewoman from
North Carolina [Mrs. Clayton].
Mrs. CLAYTON. Mr. Chairman, I thank the ranking member for yielding
time to me.
Mr. Chairman, I also want to add my comments to the retiring
gentlewoman who chairs the Committee on Small Business, and want to
note that she has brought a degree of civility that the rest of us will
emulate. Although we may be in disagreement, she certainly has a spirit
of discourse and deliberation that all of us appreciate, and we will
miss her caring and gentle hand.
Mr. Chairman, I rise today in full support of H.R. 3719, the Small
Business Program Improvement Act. Although the bill is not perfect, I
believe that, on the whole, it is a great first step toward bringing
down the cost of the Small Business Administration's most popular
programs while maintaining their availability and accessibility.
First, H.R. 3719 marginally increases the fees charged to
participants in the 504 Certified Development Corporation Program. This
program has been successful. Unfortunately, in the absence of
additional appropriations, this is the only way by which to reduce the
subsidy rate to zero and assure the continuation of this program in the
next fiscal year.
Second, this legislation removes burdensome restrictions which
prevents banks from selling the nonguaranteed portion of the SBA loans
on secondary markets, making the 7(a) loan program more attractive to
commercial bankers.
Finally, the bill continues the prohibition against locating Small
Business Development Centers at institutions

[[Page H10081]]

other than places of higher education, thereby confirming the role of
SBDC's as, first and foremost, places to gather impartial information
and to receive guidance and counseling.
These provisions, combined with others, Mr. Chairman, make H.R. 3719
a good first step toward ensuring the continued viability of many of
SBA's most popular programs and allows the SBA to reduce administrative
costs associated with those operations. Therefore, Mr. Chairman, I
encourage my colleagues to join with me in support of H.R. 3719.
Mrs. MEYERS of Kansas. Mr. Chairman, I yield such time as he may
consume to the gentleman from Nebraska [Mr. Barrett].
Mr. BARRETT of Nebraska. Mr. Chairman, I thank the gentlewoman for
yielding time to me.
Mr. Chairman, before entering into a colloquy with the gentlewoman
from Kansas, I, too, want to add my praise, as a former small
businessman of 30-plus years, for the work and the stewardship of the
gentlewoman from Kansas [Mrs. Meyers] as chair of this committee and as
ranking member prior to that. She has been a tremendous asset to small
business across America. I congratulate her, and I, too, wish her well.
Mr. Chairman, H.R. 3719 would eliminate the eligibility of lending
institutions to make low documentary loans to preferred, certified, and
lenders with ``significant experience'' I guess in quotes, in making
small business loans. I understand that these provisions would have the
Small Business Administration clarify, through regulations, the
definition of ``significant experience'' in making low documentary
small business loans.
I would ask the gentlewoman, could she clarify the intent of these
provisions?
Mrs. MEYERS of Kansas. Mr. Chairman, will the gentleman yield?
Mr. BARRETT of Nebraska. I yield to the gentlewoman from Kansas.
Mrs. MEYERS of Kansas. Mr. Chairman, the committee is concerned that
some inexperienced lenders making low doc loans do not have the
expertise necessary to administer these loans. However, the committee
strongly believes that lenders that have had a long history of making
small business loans and processing loan guarantees should not be ruled
out of making these loans. It is the committee's intent that the SBA
issue regulations that would preserve the ability of such institutions
to continue making these low doc loans.
Mr. BARRETT of Nebraska. Mr. Chairman, would the gentlewoman then
believe that a bank with 28 years of making small business loans,
processing SBA loan guarantees, including low doc guaranteed loans,
would qualify as an institution with significant experience?
Mrs. MEYERS of Kansas. Certainly, the SBA should take into account
the fact that many small lending institutions have been making small
business loans for years. The intent of this provision is to provide
the SBA with better policing authority to restrict access to lenders
without the experience or guidance from the SBA necessary to
efficiently and effectively administer low doc loans.
Mr. BARRETT of Nebraska. Mr. Chairman, I again thank the chairwoman
for yielding to me, and I thank her for her clarification.
Mr. LaFALCE. Mr. Chairman, I yield 3 minutes to the gentleman from
Texas [Mr. Bentsen].
Mr. BENTSEN. Mr. Chairman, I rise in strong support of H.R. 3719, the
Small Business Programs Improvement Act, and commend both the
chairwoman, the gentlewoman from Kansas [Mrs. Meyers], and the ranking
member, the gentleman from New York [Mr. LaFalce] for their work in
drafting a truly bipartisan bill that all the Members can support.
Although this bill may receive less notice than others, it is
extremely important in providing capital formation for America's small
businesses, and it is a tribute to our retiring chair that it is being
brought up and hopefully will be signed into law.
Drafting this bill is not an easy task. Committee on Small Business
members faced many difficult decisions and there were closed votes on
many important issues during the markup. However, the bill before us
today is a true collaboration between Republicans and Democrats on the
committee, and marks the most significant bipartisan effort I have seen
since serving on this committee.
This bill makes several changes to SBA programs do reduce the
taxpayers' contribution. It privatizes certain SBA functions, removes
restrictions on banks for selling the nonguaranteed portions of certain
SBA loans on the secondary market, and reduces certain fees that SBA
pays the lenders in cases of default.
Finally, the bill reauthorizes certain SBA programs for fiscal years
1997 and 1998, including the 7(a) loan, the 504 Development Company
loan, disaster loan, and microloan programs. Included in the
reauthorization of the 504 program is a new fee on borrowers and
participants in the program to lower the taxpayer subsidy rate of the
program and begin the road to self-sufficiency.
Finally, I want to thank the gentleman from Missouri [Mr. Talent],
the gentlewoman from Kansas [Mrs. Meyers], and the gentleman from New
York [Mr. LaFalce], for their work in addressing the loan
securitization issue.
During the committee markup, the gentleman from New York [Mr.
LaFalce], the gentleman from Missouri [Mr. Talent], and I discussed the
language of Mr. LaFalce's securitization amendment and the possible
negative effects it might have on existing participants. Mr. LaFalce
agreed to change the amendment to reflect the ability of the
administration to require a loss reserve of up to 10 percent when
circumstances require it, rather than a flat 10 percent, as originally
proposed.
We made further clarification by stating that the SBA would have the
authority, if necessary, to require lenders to securitize the
nonguaranteed portion of the SBA 7(a) loans to retain some level of
exposure in the security, not to exceed 10 percent of the amount of the
loan.
Last, the amendment was modified to state the reserve requirements be
determined solely by an institution's status as a depository
institution or a nonbank lender. Although this is reflected in the
committee report, the legislative language contradicted the committee
intent. I am pleased that all parties could agree to include the new
language in addressing an inadvertent wording problem and that this
issue could be worked out and corrected in the manager's amendment.
I urge my colleagues to support this bill and the Meyers manager's
substitute amendment.
Mr. CONYERS. Mr. Chairman, I rise today in support of H.R. 3719, the
Small Business Programs Improvement Act of 1996. H.R. 3719 will better
the ability of the Small Business Administration [SBA] to restructure
and cut costs in critical areas of the 7(a) Loan Guarantee Program and
the 504 Certified Development Company Program. These programs are both
at risk of understanding in the coming fiscal years and will benefit
greatly from the reforms provided in this act. However, there are
components of H.R. 3719 which must be addressed in order to protect
minority and women small business owners who apply for SBA loans.
H.R. 3719 greatly limits the ability of lenders to use the Low
Documentation [LowDoc] loan program of the 7(a) Program. The LowDoc
Program began as a pilot project in 1994 and has since spread
successfully across the country. The program provides a significantly
shortened one-page application for a SBA guarantee for loans of
$100,000 or less. Minority and women-owned small businesses
disproportionately apply for these smaller loans. Therefore, the LowDoc
Program has had great success in recruiting more women and minority
small business owners to the 7(a) Program. In addition, because of the
reduced paperwork required of the lending institution in LowDoc loans,
the program has increased the participation of smaller lenders who have
been found to be more likely to lend to smaller businesses. The SBA has
been criticized in recent years for overlending to larger small
businesses at the determent of smaller small businesses. The LowDoc
Program is one of the devices the SBA has created to successfully
address this complaint.
H.R. 3719 severely limits the LowDoc Program by restricting which
lenders can make LowDoc loans. Under the act, only those lenders who
are preferred, certified or have significant experience in making small
business loans can make LowDoc loans. These categorizations will
greatly limit the number of lenders who can make LowDoc loans. In
particular, the number of small lending institutions able to provide
LowDoc loans will be greatly

[[Page H10082]]

reduced. Thus, H.R. 3719 acts to limit accessibility to LowDoc loans.
According to Representative Meyers, H.R. 3719 limits access to LowDoc
loans on the basis of anecdotal evidence that LowDoc loans are high
risk. However, the SBA has shown that there is no reason to believe
that LowDoc loans are more risky than other loans, and, in fact, they
may be even less risky. The SBA has found that both the currency rate,
the rate of payments made on time, and the default rate on LowDoc loans
are as good or better than those for other SBA loans.
There appears to be little reason to alter the LowDoc Loan Program
given that the program has made the 7(a) loan program more accessible
to minority and women-owned small businesses, to all smaller
businesses, and to small lending-institutions. In addition, the program
has proven to be a relatively safe loan program. The changes to the
LowDoc program are simply an example of the micromanaging which exists
throughout H.R. 3719 and which is not necessary to successfully reform
the SBA. However, I am confident that these problems can be worked out
through amendments and in conference committee. Therefore, I restate my
support of H.R. 3719 and commend the bipartisan effort which led to its
creation.
Mr. POSHARD. Mr. Chairman, I rise before you today in support of the
Small Business Improvement Act, H.R. 3719.
Before speaking on the merits of the legislation, let me take this
opportunity to thank the Chair of this committee, my colleague from
Kansas, Congresswoman Meyers, who has been not only a good chair of the
committee but a good Member of the House and a good friend. On behalf
of the people of the 19th district, I wish her well in her future
endeavors.
This bill makes individuals who have suffered from all types of
disasters eligible for loans from the Disaster Loan Program. While I
certainly believe we should respond to people in need after a natural
disaster, I believe we must make sure that the primary focus of these
efforts are on sudden, natural disasters, such as tornadoes, and
floods, and as we are all watching today, hurricanes and tropical
storms. In my district we deal with sudden disasters on a yearly basis
and we must be capable of responding to these situations at any given
moment, and it is imperative that the resources are in place.
Having expressed those reservations, I do rise in support of the bill
and urge my colleagues to support H.R. 3719 and thank the Chair and my
ranking member, Congressman LaFalce, for their efforts in bringing this
bill before us today.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I have always been a
supporter of small business, both in my district and throughout the
Nation. Small business is the motor of our economic engine, it supplies
most of the jobs and at least half of the economic activity. It is my
firm belief that the Government should do everything it can within
reason to assist small businesses in succeeding. The Small Business
Administration has been instrumental in the development, growth, and
success of thousands of businesses and should be commended for its work
and efforts. The SBA General Store in my district in Houston is a prime
example of how this agency has played an important part in the
expansion and growth of our economy.
While all of this is true, in these difficult times of tight budgets
we must trim costs, where we can, but we must do so while still
striving to achieve our basic goals. We must not be too short-sighted
and slash and burn budgets and programs, doing more harm than good in
the long run. Instead we must carefully prune away what we can, leaving
the fruits intact. H.R. 3719 takes a reasonable approach at reforming
some of the SBA's loan programs.
I support small business, the President supports small business, and
I encourage all of my colleagues to do the same.
Mr. TORKILDSEN. Mr. Chairman, the Small Business Programs Improvement
Act of 1996 reforms business loan programs administered by the Small
Business Administration [SBA]. Specifically, the bill reduces subsidy
rates for commercial development and disaster loans, directs the SBA to
privatize certain aspects of the loan application and approval process
to expedite service to potential borrowers, and ensures adequate
Federal funding to carry out SBA programs.
H.R. 3719 includes an amendment I offered, which was adopted during
the full committee markup of this legislation, regarding disaster
assistance loans. My amendment accomplished two things: No. 1, it made
an addition to the definition of a disaster under section (3)(k) of the
Small Business Act by inserting language regarding ocean conditions;
and No. 2, it set an effective date, for the amendment, with respect to
any disaster occurring on or after March 1, 1994. I offered this
amendment in an attempt to help remedy problems affecting the fishing
industry in Gloucester and other areas in Massachusetts.
The Commonwealth requested disaster assistance from the U.S. Small
Business Administration. The request was made on behalf of the
fishermen of Essex, Bristol, and Barnstable Counties, all who have
suffered severe economic losses because of the collapse of cod, yellow
tail flounder, and haddock fisheries in their region, and the closing
of certain areas to fishing by the Federal Government. Incredibly, this
request was denied by the SBA.
Knowing that the vast majority of these fishermen and processors are
small business owners, this small addition to the definition of
disaster assistance is a logical way to help. It is clear that the
Federal Government's actions precipitated this sudden closure after
years of pronouncements that the situation was under control, and
therefore, the request was justified.
Mr. Chairman, this is a good bill for small business and I urge my
colleagues to support it.
Ms. MILLENDER-McDONALD. Mr. Chairman, I rise in strong support of the
manager's amendment. H.R. 3719 attacks the small businesses in my
Congressional district and for that matter across the Nation. I am
especially incensed by the manner in which this bill treats innocent
victims of natural disasters and am therefore pleased with the changes
to the Disaster Loan Program included in the manager's amendment.
The Small Business Administration's Disaster Loan Program helps
victims of natural disasters rebuild and get back on their feet. The
Northridge earthquake had a devastating impact on southern California.
From the point at which the earthquake struck, on January 17, 1994
until June 30, 1996 the Small Business Administration provided 124,180
loans, totaling $4.5 billion to businesses and individuals that may not
otherwise have been able to rebuild.
And I will remind my colleagues that it is not just California that
benefits from the disaster loans. Even as we speak, millions of people
along the East Coast are preparing for the potential devastation that
may be caused by hurricane Fran.
While my thoughts and my prayers are with the potential victims of
hurricane Fran, I am committed to do all I can to ensure that if they
do suffer damage, that they are given all available assistance to
rebuild their lives and their economy.
Low interest disaster loans are key to the economic recovery of an
area after a disaster has hit. The manager's amendment I am pleased to
report, would cap the interest rate at 7 percent. In the last 6 years
California alone, which has certainly seen its share of disasters, has
received 165,373 loans totaling over $5.5 billion. Given the importance
of small businesses to any economy, I believe that these loans have
been instrumental to the economic recovery that the State has achieved.
The changes to the Disaster Assistance Program are but one reason I
support this amendment. Overall I believe that it makes the bill more
responsive to the needs of our Nation's small and emerging businesses
and I therefore urge my colleagues to support the manager's amendment.
Mr. BALDACCI, Mr. Chairman, I am pleased we are prepared to approve
this important bill authorizing certain programs in the Small business
Administration. The Small Business Committee, on which I serve, has
worked diligently to reach accord on certain differences with regard to
policy. As a result, we have been able to produce a responsible
authorization bill that protects popular SBA programs while reducing
the Federal Government's share of expenses. Given the growing
popularity and need for such programs, these changes were necessary to
instill a sense of commitment in all participants.
As a freshman Member of Congress, I am particularly pleased to have
legislation I introduced earlier this year included in this
authorization bill. This is my first legislative initiative to be
approved by the full House, and I hope it will be enacted into law. My
legislation will encourage banks to make capital available to small
firms that want to export their goods. It does so by increasing the
guarantee rate on export loans backed by the SBA. The change was
necessary because the SBA guarantee rate for export working capital
loans was reduced in legislation approved last year, creating a
disparity between the rate offered to small businesses by the SBA, and
the rate offered to larger businesses by the Export-Import Bank. Prior
to the 1995 legislation, SBA and the Export-Import Bank harmonized
their export loan programs to ensure that all borrowers--big businesses
and small businesses--would have the same loan terms. Both provided a
90 percent guarantee rate on loans. My legislation returns the SBA
guarantee rate to 90 percent, the same level as that offered by the
Export-Import Bank.
It is widely believed that the reduction in SBA's guarantee rate for
export loans had a chilling effect on small business lenders, who were
required to incur greater risk. A recent

[[Page H10083]]

letter from the Trade Promotion Coordinating Committee indicated that
over half of the lenders polled, small lenders in particular, would
retreat from making trade finance loans to small businesses due to
increased risk. The letter, signed by the Secretary of Commerce, the
SBA administrator, the Ex-Im Bank chairman, and the director of the
U.S. Trade and Development Agency, urged reharmonization of the rates.
In addition, a recent GAO study noted that the guarantee rate is
critical for funding original loans, and that a higher rate is
particularly important when the lender or borrower is new to export.
This is precisely the audience SBA serves in an effort to increase
small business exports.
I'm pleased that my legislation was added to the bill. It's important
to me because it recognizes the critical role of trade and exports to
the economy of Maine and the Nation. Figures from the Department of
Commerce underline the incredible potential of foreign markets.
According to them, every $1 billion in increased trade creates
approximately 20,000 manufacturing jobs and 40-60,000 service and
support jobs. Moreover, wages associated with exported goods are some
20 percent higher than those related to nonexports.
Reharmonizing the guarantee rate could have very positive effects for
our economy, as well as small business exporters, one of the fastest
growing segments of the exporting community. As a member of the Small
Business Committee, I am constantly seeking ways to help smaller
companies expand and succeed. It is my strong belief that small
businesses will benefit from increased trade. Promoting exports is one
of the best means to this end. Encouraging new small business exports
is an important, nonpartisan public policy objective.
I urge my colleagues to support this important legislation.
The CHAIRMAN. All time for general debate has expired.
The committee amendment in the nature of a substitute printed in the
bill shall be considered by title as an original bill for the purpose
of amendment and pursuant to the rule, the first three sections and
each title are considered as read.
During consideration of the bill for amendment, the Chair may accord
priority in recognition to a Member offering an amendment that he has
printed in the designated place in the Congressional Record. Those
amendments will be considered read.
The Chairman of the Committee of the Whole may: (1) postpone until a
time during further consideration in the Committee of the Whole a
request for a recorded vote on an amendment; and (2) reduce to 5
minutes the minimum time for electronic voting on any postponed
question that follows another electronic vote without intervening
business, provided that the minimum time for electronic voting on the
first in any series of questions shall be 15 minutes.
The Clerk will designate section 1.
The text of section 1 is as follows:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Small
Business Programs Improvement Act of 1996''.

Mrs. MEYERS of Kansas. Mr. Chairman, I ask unanimous consent that the
entire committee amendment in the nature of a substitute be considered
as read printed in the Record, and open to amendment at any point.
The CHAIRMAN. Is there objection to the request of the gentlewoman
from Kansas?
There was no objection.
The text of the remainder of the committee amendment in the nature of
a substitute is as follows:
(b) Table of Contents.--

Sec. 1. Short title; table of contents.
Sec. 2. Administrator defined.
Sec. 3. Effective date.

TITLE I--AMENDMENTS TO SMALL BUSINESS ACT

Sec. 101. References.
Sec. 102. Risk management database.
Sec. 103. Section 7(a) loan program.
Sec. 104. Disaster loan program.
Sec. 105. Microloan demonstration program.
Sec. 106. Small business development center program.
Sec. 107. Miscellaneous authorities to provide loans and other
financial assistance.
Sec. 108. Small business competitiveness demonstration program.
Sec. 109. Amendment to Small Business Guaranteed Credit Enhancement Act
of 1993.
Sec. 110. 1998 authorizations.
Sec. 111. Level of participation for export working capital loans.

TITLE II--AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT

Sec. 201. References.
Sec. 202. Modifications to development company debenture program.
Sec. 203. Required actions upon default.
Sec. 204. Loan liquidation pilot program.
Sec. 205. Registration of certificates.
Sec. 206. Preferred surety bond guarantee program.

SEC. 2. ADMINISTRATOR DEFINED.

In this Act, the term ``Administrator'' means the
Administrator of the Small Business Administration.

SEC. 3. EFFECTIVE DATE.

Except as otherwise expressly provided, this Act and the
amendments made by this Act shall take effect on October 1,
1996.
TITLE I--AMENDMENTS TO SMALL BUSINESS ACT

SEC. 101. REFERENCES.

Except as otherwise expressly provided, whenever in this
title an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or
other provision of the Small Business Act (15 U.S.C. 631 et
seq.).

SEC. 102. RISK MANAGEMENT DATABASE.

Section 4(b) (15 U.S.C. 633) is amended by inserting after
paragraph (2) the following:
``(3) Risk management database.--
``(A) Establishment.--The Administration shall establish,
within the management system for the loan programs authorized
by subsections (a) and (b) of section 7 of this Act and title
V of the Small Business Investment Act of 1958, a management
information system that will generate a database capable of
providing timely and accurate information in order to
identify loan underwriting, collections, recovery, and
liquidation problems.
``(B) Information to be maintained.--In addition to such
other information as the Administration considers
appropriate, the database established under subparagraph (A)
shall, with respect to each loan program described in
subparagraph (A), include information relating to--
``(i) the identity of the institution making the guaranteed
loan or issuing the debenture;
``(ii) the identity of the borrower;
``(iii) the total dollar amount of the loan or debenture;
``(iv) the total dollar amount of government exposure in
each loan;
``(v) the district of the Administration in which the
borrower has its principal office;
``(vi) the borrower's principal line of business, as
identified by Standard Industrial Classification Code (or any
successor to that system);
``(vii) the delinquency rate for each program (including
number of instances and days overdue);
``(viii) the number of defaults in each program (including
losses and recoveries);
``(ix) the number of deferrals or forbearances in each
program (including days and number of instances); and
``(x) comparisons on the basis of loan program, lender,
Administration district and region, for all the data elements
maintained.
``(C) Deadline for operational capability.--The database
established under subparagraph (A) shall be operational not
later than March 31, 1997, and shall capture data beginning
on the first day of the first quarter of fiscal year 1997
beginning after such date and thereafter.''.

SEC. 103. SECTION 7(a) LOAN PROGRAM.

(a) Servicing and Liquidation of Loans by Preferred
Lenders.--Section 7(a)(2)(C)(ii)(II) (15 U.S.C.
636(a)(2)(C)(ii)(II)) is amended to read as follows:

``(II) complete authority to service and liquidate such
loans without obtaining the prior specific approval of the
Administration for routine servicing and liquidation
activities, but shall not take any actions creating an actual
or apparent conflict of interest.''.

(b) Certified Lenders Program.--Section 7(a)(19) (15 U.S.C.
636(a)(19)) is amended to read as follows:
``(19)(A) Certified lenders program.--
``(i) Establishment.--In addition to the Preferred Lenders
Program authorized by the proviso in section 5(b)(7), the
Administration is authorized to establish a Certified Lenders
Program for lenders who establish their knowledge of
Administration laws and regulations concerning the guaranteed
loan program and their proficiency in program requirements.
``(ii) Suspension and revocation.--The designation of a
lender as a certified lender shall be suspended or revoked at
any time that the Administration determines that the lender
is not adhering to its rules and regulations or that the loss
experience of the lender is excessive as compared to other
lenders, but such suspension or revocation shall not affect
any outstanding guarantee.
``(B) Uniform and simplified loan forms.--In order to
encourage all lending institutions and other entities making
loans authorized under this subsection to provide loans of
$50,000 or less in guarantees to eligible small business loan
applicants, the Administration shall develop and allow
participating lenders to solely utilize a uniform and
simplified loan form for such loans.
``(C) Low documentation loan program.--The Administrator
may carry out the low documentation loan program for loans of
$100,000 or less only through Preferred Lenders and Certified
Lenders, or lenders with significant experience making small
business loans. The Administration shall give special
consideration to lenders who have made loans under the
authority of this section. The Administrator shall promulgate
regulations defining the experience necessary for lenders
other than Preferred or Certified Lenders for participation
as a lender in the low documentation loan program no later
than 90 days after the date of enactment of this subsection.

[[Page H10084]]

``(D) Authority liquidate loans.--
``(i) In general.--Lenders participating in the Certified
Lenders Program shall have authority to liquidate loans made
with a guarantee from the Administration.
``(ii) Approval.--The Administrator has the authority to
require a certified lender to request approval of a routine
liquidation activity, and if the Administrator does not
approve or deny a request made by a certified lender within a
period of 3 business days, such request shall be deemed to be
approved.
``(E) Low documentation loan program subsidy rate.--The
Administrator shall with the assistance of the Director of
the Office of Management and Budget establish and monitor, on
an annual basis, the subsidy rate for the low documentation
loan program, independently of other loans authorized by this
section.''.
(c) Limitation on Conducting Pilot Projects.--Section 7(a)
(15 U.S.C. 636(a)) is amended by adding at the end the
following new paragraph:
``(25) Limitation on conducting pilot projects.--
``(A) In general.--Not more than 10 percent of the total
number of loans guaranteed in any fiscal year under this
subsection may be awarded as part of a pilot program which is
commenced by the Administrator on or after October 1, 1996.
``(B) Pilot program defined.--In this paragraph, the term
`pilot program' means any lending program initiative,
project, innovation, or other activity not specifically
authorized by law.''.
(d) Securitization of Unguaranteed Portions of SBA Loans.--
Section 5(f)(3) (15 U.S.C. 634(f)(3)) is amended by adding at
the end the following: ``The Administration may not
prohibit a lender from securitizing the nonguaranteed
portion of any loan made under section 7(a). In order to
reduce the risk of loss to the government in the event of
default, the Administration shall require all lenders
securitizing, or requesting Administration approval for
the securitization of the nonguaranteed portion of any
loan after August 1, 1996, to retain exposure of up to 10
percent of the amount of the loan, which percentage shall
be applicable uniformly to both depository institutions
and other lenders.''.
(e) Conditions on Purchase of Loans.--
(1) Servicing fee.--Section 5(g)(5) (15 U.S.C. 634(g)(5))
is amended by adding at the end the following:
``(C) In the event the Administration pays a claim under a
guarantee issued under this Act, the servicing fees paid to
the lender from the earliest date of default to the date of
payment of the claim shall be no more than the agreed upon
rate, minus one percent.''.
(2) Payment of accrued interest.--Section 7(a)(17) is
amended--
(A) by striking ``(17) The Administration'' and inserting
``(17)(A) The Administration''; and
(B) by adding at the end the following:
``(B) Any bank or other lending institution making a claim
for payment on the guaranteed portion of a loan made under
this subsection shall be paid the accrued interest due on the
loan from the earliest date of default to the date of payment
of the claim at a rate not to exceed the rate of interest on
the loan on the date of default, minus one percent.''.
(f) Plan for Transfer of Loan Servicing Functions to
Centralized Centers.--
(1) Implementation plan required.--The Administrator of the
Small Business Administration shall submit a detailed plan
for consolidating, in one or more centralized centers, the
performance of the various functions relating to the
servicing of loans directly made or guaranteed by the
Administration pursuant to the Small Business Act, addressing
the matters described in paragraph (2) by the deadline
specified in paragraph (3).
(2) Contents of plan.--In addition to such other matters as
the Administrator may deem appropriate, the plan required by
paragraph (1) shall include--
(A) the proposed number and location of such centralized
loan processing centers;
(B) the proposed workload (identified by type and numbers
of loans and their geographic origin by the Small Business
Administration district office) and staffing of each such
center;
(C) a detailed, time-phased plan for the transfer of the
identified loan servicing functions to each proposed center;
and
(D) any identified impediments to the timely execution of
the proposed plan (including adequacy of available financial
resources, availability of needed personnel, facilities, and
related equipment) and the Administrator's recommendations
for addressing such impediments.
(3) Deadline for submission.--The plan required by
paragraph (1) shall be submitted to the Committees on the
Small Business of the House of Representatives and Senate not
later than February 28, 1997.
(g) Preferred Lender Standard Review Program.--Not later
than 60 days after the date of enactment of this Act, the
Administrator shall issue a request for proposals regarding
the standard review program for the Preferred Lender Program
established by section 5(b)(7) of the Small Business Act (15
U.S.C. 634(b)(7)). The Administrator shall require such
standard review for each new entrant to the Preferred Lender
Program.
(h) Independent Study of Loan Programs.--
(1) Study required.--The Administrator shall conduct a
comprehensive assessment of the performance of the loan
programs authorized by section 7(a) of the Small Business Act
(15 U.S.C. 636(a)) and title V of the Small Business
Investment Act of 1958 (15 U.S.C. 661) addressing the matters
described in paragraph (2) and resulting in a report to
Congress pursuant to paragraph (5).
(2) Matters to be assessed.--In addition to such other
matters as the Administrator considers appropriate, the
assessment required by paragraph (1) shall address, with
respect to each loan program described in paragraph (1) for
each of the fiscal years described in paragraph (3)--
(A) the number and frequency of deferrals and defaults;
(B) default rates;
(C) comparative loss rates, by--
(i) type of lender (separately addressing preferred
lenders, certified lenders, and general participation
lenders);
(ii) term of the loan; and
(iii) dollar value of the loan at disbursement; and
(D) the economic models used by the Office of Management
and Budget to calculate the credit subsidy rate applicable to
the loan programs.
(3) Period of assessment.--The assessments undertaken
pursuant to paragraph (2) shall address data for the period
beginning with the first full fiscal year of the
implementation of each loan program described in paragraph
(1) through fiscal year 1995.
(4) Performance by the private sector.--
(A) Contractor performance.--A private sector contractor
shall be used by the Administrator to conduct the assessment
required by paragraph (1) and to prepare the report to
Congress required by paragraph (3).
(B) Solicitation and award.--The contract shall be awarded
pursuant to a solicitation issued not later than 60 days
after the date of the enactment of this Act, which shall
provide for full and open competition. The Administrator
shall make every reasonable effort to award the contract not
later that 60 days after the date specified in the
solicitation for receipt of proposals.
(C) Access to information.--The Administrator shall provide
to the contractor access to any information collected by or
available to the Administration with regard to the loan
programs being assessed. The contractor shall preserve the
confidentiality of any information for which confidentiality
is protected by law or properly asserted by the person
submitting such information.
(D) Contract funding.--The Administrator shall fund the
cost of the contract from the amounts appropriated for the
salaries and expenses of the Administration for fiscal year
1997.
(5) Report to congress.--
(A) Contents.--The contractor shall submit a report of--
(i) its analyses of the matters to be assessed pursuant to
paragraph (2); and
(ii) its independent recommendations, with respect to each
loan program, regarding--

(I) improving the Administration's timely collection and
subsequent management of data to measure the performance of
each loan program described in paragraph (1); and
(II) reducing loss rates for each such loan program.

(B) Submission by contractor.--The contractor shall submit
the report required by subparagraph (A) not later than 6
months after the date of the contract award.
(C) Submission to congress.--The Administrator shall submit
the report received from the contractor pursuant to
subparagraph (B) to the Committees on Small Business of the
House of Representatives and the Senate within 30 days of
receipt of the report. The Administrator shall append his
comments, and those of the Office of Management and Budget,
if any, to the report.
(i) General Accounting Office Study.--
(1) In general.--The General Accounting Office shall
conduct a comparison of the cost of liquidation for--
(A) loans guaranteed under the Preferred Lenders Program
that are authorized by section 7(a) of the Small Business Act
(15 U.S.C. 636(a)) and liquidated by the Preferred Lenders;
(B) loans made and liquidated by, Preferred Lenders, but
not guaranteed under the authority in section 7(a); and
(C) loans guaranteed by the Small Business Administration
under the authority in section 7(a) and liquidated by the
Administration, taking into account all of the related costs
incurred by the Federal Government.
(2) Report.--Not later than 9 months after the date of
enactment of this Act the General Accounting Office shall
deliver the results of the study to the Committees on Small
Business of the House and Senate.

SEC. 104. DISASTER LOAN PROGRAM.

(a) Interest Rate.--Section 7(c) (15 U.S.C. 636(c)) is
amended by redesignating paragraphs (6) and (7) as paragraphs
(8) and (9), respectively, and by inserting after paragraph
(5) the following:
``(6) Disasters commencing after october 1, 1996.--
Notwithstanding any other provision of law, the interest rate
on the Federal share of any loan made under subsection (b)(1)
and (b)(2) on account of a disaster commencing on or after
October 1, 1996, shall be in the case of a homeowner, or
business, or other concern, including agricultural
cooperatives, unable to obtain credit elsewhere, at the
rate prescribed by the Administration but not more than
\3/4\ of the rate determined by the Secretary of the
Treasury, taking into consideration the current average
market yield on outstanding marketable obligations of the
United States with remaining periods to maturity
comparable to the average maturities of such loans plus an
additional charge of not to exceed 1 percent per annum as
determined by the Administrator, and adjusted to the
nearest \1/8\ of 1 percent.
``(7) Liability.--Whoever wrongfully misapplies the
proceeds of a loan under subsection (b) shall be liable to
the Administrator in an amount equal to 1\1/2\ times the
original principal amount of the loan.''.
(b) Private Sector Loan Servicing Demonstration Program.--

[[Page H10085]]

(1)(A) Demonstration program required.--The Administration
shall conduct a demonstration program, within the parameters
described in paragraph (2), to evaluate the comparative costs
and benefits of having the Administration's portfolio of
disaster loans serviced under contract rather than directly
by employees of the Administration.
(B) Initiation date.--Not later than 90 days after the date
of enactment of this Act, the Administration shall issue a
request for proposals for the program parameters described in
paragraph (2).
(2) Demonstration program parameters.--
(A) Loan sample.--The sample of loans for the demonstration
program shall be randomly drawn from the Administration's
portfolio of loans made pursuant to section 7(b) of the Small
Business Act and include 20,000 loans for residential
properties and 5,000 loans for commercial properties.
(B) Contract and options.--The Administration shall solicit
and competitively award one or more contracts to service the
loans included in the sample of loans described in
subparagraph (A) for a term of 2 years with 5 2-year options,
each to be awarded subject to subparagraph (C).
(C) Assessments of performance.--Prior to award of any
contract option, the Administration shall assess the costs
and performance of each contractor and compare such costs and
such performance to the costs and performance of servicing
disaster loans by employees of the Administration. The
Administrator shall not exercise a contract option if the
cost of performance of the loan servicing by the contractor
exceeds the cost of performance of the loan servicing by
employees of the Administration. The Administrator may
terminate the contract during its initial term (or any
subsequent option period), based upon performance and cost
criteria specified in the solicitation and included in the
contract.
(D) Disposition of government furnished property.--The
contract shall require the contractor to--
(i) maintain the confidentiality of the loan files
furnished by the Administration; and
(ii) return such loan files and other Government-furnished
property within a specified period after expiration (or
termination) of the contract.
(3) Term of demonstration program.--
(A) In general.--The demonstration program required by
paragraph (1) shall commence on the first day of the first
fiscal year quarter after the award of the contract and
continue through the last day of the fiscal year quarter at
the expiration of the 2-year contract period or any
subsequent contract option.
(B) Early termination.--If the Administrator terminates
each contract pursuant to paragraph (2)(C), the demonstration
program shall end on the effective date of such termination.
(4) Reports.--
(A) Interim reports.--The Administrator shall submit to the
Committees on Small Business of the House of Representatives
and Senate interim reports on the conduct of the
demonstration program not later than 60 days prior to the
expiration of the initial 2-year contract performance period,
each subsequent option period, or termination of a contract.
The contractor shall be afforded a reasonable opportunity to
attach comments to each such report.
(B) Final report.--The Administrator shall submit to the
Committees on Small Business of the House of Representatives
and Senate a final report within 120 days of the termination
of the demonstration program.
(c) Definition of Disaster.--(1) Section 3(k) (15 U.S.C.
632(k)) is amended by striking ``ocean conditions'' and
inserting ``ocean conditions, or government action
(regulatory or otherwise)''.
(2) For the purposes of this Act this amendment shall be
considered effective with respect to any disaster occurring
on or after March 1, 1994.

SEC. 105. MICROLOAN DEMONSTRATION PROGRAM.

(a) Technical Assistance Grant Requirements.--Section
7(m)(4) (15 U.S.C. 636(m)(4)) is amended--
(1) in subparagraph (A) by striking ``25 percent'' and
inserting ``20 percent''; and
(2) in subparagraph (B) by striking ``25 percent'' and
inserting ``35 percent''.
(b) Implementation of Guaranteed Microloan Pilot Program.--
(1) Action required.--The Administrator shall implement or
submit a detailed report explaining the impediments to the
implementation of a Guaranteed Microloan Pilot Program
pursuant to section 7(m)(12) (15 U.S.C. 636(m)(12))
addressing the matters described in paragraph (2) by the
deadline specified in paragraph (3).
(2) Contents of implementation report.--In addition to such
other matters as the Administrator may deem appropriate, the
plan required by paragraph (1) shall include any identified
impediments to implementation of a Guaranteed Microloan Pilot
Program that, in the opinion of the Administrator, require
amendments to the program's authorizing legislation, and if
such impediments are identified, includes recommendations for
such statutory changes.
(3) Deadline for submission.--The plan required by
paragraph (2) shall be submitted to the Committees on Small
Business of the House of Representatives and Senate not later
than December 1, 1996.
(c) Limitation on Funding.--In the event that the
Administrator shall fail to submit the report required by
subsection (b)(1) by the deadline specified in subsection
(b)(3), none of the amounts appropriated to carry out the
Microloan Program authorized by section 7(m)(12) of the Small
Business Act (15 U.S.C. 636(m)(12)) during fiscal year 1997
may be expended until such time as the pilot program is
implemented or the report is submitted.

SEC. 106. SMALL BUSINESS DEVELOPMENT CENTER PROGRAM.

(a) Associate Administrator for Small Business Development
Centers.--
(1) Duties.--Section 21(h) (15 U.S.C. 648(h)) is amended to
read as follows:
``(h) Associate Administrator for Small Business
Development Centers.--
``(1) Appointment and compensation.--The Administrator
shall appoint an Associate Administrator for Small Business
Development Centers who shall report to an official who is
not more than one level below the Office of the Administrator
and who shall serve without regard to the provisions of title
5 governing appointments in the competitive service, and
without regard to chapter 51, and subchapter III of chapter
53 of such title relating to classification and General
Schedule pay rates, but at a rate not less than the rate of
GS-17 of the General Schedule.
``(2) Duties.--
``(A) In general.--The sole responsibility of the Associate
Administrator for Small Business Development Centers shall be
to administer the small business development center program.
Duties of the position shall include, but are not limited to,
recommending the annual program budget, reviewing the annual
budgets submitted by each applicant, establishing appropriate
funding levels therefore, selecting applicants to participate
in this program, implementing the provisions of this section,
maintaining a clearinghouse to provide for the dissemination
and exchange of information between small business
development centers and conducting audits of recipients of
grants under this section.
``(B) Consultation requirements.--In carrying out the
duties described in this subsection, the Associate
Administrator shall confer with and seek the advice of the
Board established by subsection (i) and Administration
officials in areas served by the small business development
centers; however, the Associate Administrator shall be
responsible for the management and administration of the
program and shall not be subject to the approval or
concurrence of such Administration officials.''.
(2) References to associate administrator.--Section 21 (15
U.S.C. 648) is amended--
(A) in subsection (c)(7) by striking ``Deputy Associate
Administrator of the Small Business Development Center
program'' and inserting ``Associate Administrator for Small
Business Development Centers''; and
(B) in subsection (i)(2) by striking ``Deputy Associate
Administrator for Management Assistance'' and inserting
``Associate Administrator for Small Business Development
Centers''.
(b) Extension or Renewal of Cooperative Agreements.--
Section 21(k)(3) (15 U.S.C. 648(k)(3)) is amended to read as
follows:
``(3) Extension or renewal of cooperative agreements.--
``(A) In general.--In extending or renewing a cooperative
agreement of a small business development center, the
Administration shall consider the results of the examination
and certification program conducted pursuant to paragraphs
(1) and (2).
``(B) Certification requirement.--After September 30, 2000,
the Administration may not renew or extend any cooperative
agreement with a small business development center unless the
center has been approved under the certification program
conducted pursuant to this subsection; except that the
Associate Administrator for Small Business Development
Centers may waive such certification requirement, in the
discretion of the Associate Administrator, upon a showing
that the center is making a good faith effort to obtain
certification.''.
(c) Technical Correction.--Section 21(l) (15 U.S.C. 648(l))
is amended to read as follows:
``(l) Contract Authority.--The authority to enter into
contracts shall be in effect for each fiscal year only to the
extent and in the amounts as are provided in advance in
appropriations Acts. After the administration has entered a
contract, either as a grant or a cooperative agreement, with
any applicant under this section, it shall not suspend,
terminate, or fail to renew or extend any such contract
unless the Administration provides the applicant with written
notification setting forth the reasons therefore and
affording the applicant an opportunity for a hearing, appeal,
or other administrative proceeding under the provisions of
chapter 5 of title 5, United States Code.''.

SEC. 107. MISCELLANEOUS AUTHORITIES TO PROVIDE LOANS AND
OTHER FINANCIAL ASSISTANCE.

(a) Funding Limitation; Seminars.--Section 7(d) (15 U.S.C.
636(d)) is amended--
(1) by striking ``(d)(1)'' and inserting ``(d)''; and
(2) by striking paragraph (2).
(b) Trade Adjustment Loans.--Section 7(e) (15 U.S.C.
636(e)) is amended to read as follows:
``(e) [RESERVED].''.
(c) Waiver of Credit Elsewhere Test for Colleges and
Universities.--Section 7(f) (15 U.S.C. 636(f)) is amended to
read as follows:
``(f) [RESERVED].''.
(d) Loans to Small Business Concerns for Solar Energy and
Energy Conservation Measures.--Section 7(l) (15 U.S.C.
636(l)) is amended to read as follows:
``(l) [RESERVED].''.

SEC. 108. SMALL BUSINESS COMPETITIVENESS DEMONSTRATION
PROGRAM.

(a) Extension of Demonstration Program.--Section 711(c) of
the Small Business Competitiveness Demonstration Program Act
of 1988 (15 U.S.C. 644 note; 102 Stat. 3890) is amended by
striking ``September 30, 1996'' and inserting ``September 30,
2000''.
(b) Reporting of Subcontract Participation in Contracts for
Architectural and Engineering Services.--Section 714(b)(5) of
the Small Business Competitiveness Demonstration Program Act
of 1988 (15 U.S.C. 644 note; 102 Stat. 3892) is amended to
read as follows:

[[Page H10086]]

``(5) Duration.--The system described in subsection (a)
shall be established not later than October 1, 1996 (or as
soon as practicable thereafter on the first day of a
subsequent quarter of fiscal year 1997), and shall terminate
on September 30, 2000.''.
(c) References to Architectural and Engineering Services.--
(1) In general.--The Small Business Competitiveness
Demonstration Program Act of 1988 (15 U.S.C. 644 note; 102
Stat. 3889 et seq.) is amended in subsections (a)(3) and (d)
by striking ``surveying and mapping'' and inserting
``surveying, mapping, and landscape architecture''.
(2) Designated industry groups.--Section 717(d) of the
Small Business Competitiveness Demonstration Program Act of
1988 (15 U.S.C. 644 note; 102 Stat. 3894) is amended by
inserting ``standard industrial classification codes 0781 (if
identified as pertaining to architecture services),'' after
``(if identified as pertaining to mapping services),''.
(d) Reports to Congress.--
(1) In general.--Section 716 of the Small Business
Competitiveness Demonstration Program Act of 1988 (15 U.S.C.
644 note; 102 Stat. 3893) is amended--
(A) in subsection (a), by striking ``fiscal year 1991 and
1995'' and inserting ``each of fiscal years 1991 through
1999'';
(B) in subsection (a), by striking ``results'' and
inserting ``cumulative results''; and
(C) in subsection (c), by striking ``1996'' and inserting
``1999''.
(2) Cumulative report through fiscal year 1995.--A
cumulative report of the results of the Small Business
Competitiveness Demonstration Program for fiscal years 1991
through 1995 shall be submitted not later than 60 days after
the date of the enactment of this Act pursuant to section
716(a) of the Small Business Competitiveness Demonstration
Program Act of 1988 (15 U.S.C. 644 note; 102 Stat. 3893), as
amended by paragraph (1) of this subsection.

SEC. 109. AMENDMENT TO SMALL BUSINESS GUARANTEED CREDIT
ENHANCEMENT ACT OF 1993.

(a) Section 7 of the Small Business Guaranteed Credit
Enhancement Act of 1993 (Public Law 103-81; 15 U.S.C. 634
note) is repealed effective September 29, 1996.
(b) Clerical Amendment.--The table of contents for the
Small Business Guaranteed Credit Enhancement Act of 1993
(Public Law 103-81; 15 U.S.C. 631 note) is amended by
striking the item relating to section 7.

SEC. 110. 1998 AUTHORIZATIONS.

Section 20 (15 U.S.C. 631 note) is amended--
(1) in subsection (p), by striking ``authorized for fiscal
year 1997'' and inserting ``authorized for each of fiscal
years 1997 and 1998'';
(2) by striking subsection (p)(3)(B) and by inserting the
following:
``(B) $268,000,000 in guarantees of debentures; and'';
(3) in subsection (q)(1) by striking ``fiscal year 1997''
and inserting ``each of fiscal years 1997 and 1998''; and
(4) in subsection (q)(2) by striking ``year 1997'' and
inserting ``years 1997 and 1998''.

SEC. 111. LEVEL OF PARTICIPATION FOR EXPORT WORKING CAPITAL
LOANS.

Section 7(a)(2) (15 U.S.C. 636(a)(2)) is amended by adding
at the end the following:
``(D) Participation under export working capital program.--
Notwithstanding subparagraph (A), in an agreement to
participate in a loan on a deferred basis under the Export
Working Capital Program established pursuant to paragraph
(14)(A), such participation by the Administration shall be
equal to the rate specified under this paragraph as in effect
on the day before the date of the enactment of the Small
Business Lending Enhancement Act of 1995.''.
TITLE II--AMENDMENTS TO SMALL BUSINESS INVESTMENT ACT

SEC. 201. REFERENCES.

SEC. 202. MODIFICATIONS TO DEVELOPMENT COMPANY DEBENTURE
PROGRAM.

(a) Decreased Loan to Value Ratios.--Section 502(3) (15
U.S.C. 696(3)) is amended to read as follows:
``(3) Criteria for assistance.--
``(A) In general.--Any development company assisted under
this section or section 503 of this title must meet the
criteria established by the Administration, including the
extent of participation to be required or amount of paid-in
capital to be used in each instance as is determined to be
reasonable by the Administration.
``(B) Community injection funds.--
``(i) Sources of funds.--Community injection funds may be
derived, in whole or in part, from--

``(I) State or local governments;
``(II) banks or other financial institutions;
``(III) foundations or other not-for-profit institutions;
or
``(IV) the small business concern (or its owners,
stockholders, or affiliates) receiving assistance through a
body authorized by this title.

``(ii) Funding from institutions.--Not less than 50 percent
of the total cost of any project financed pursuant to clauses
(i), (ii), or (iii) of subparagraph (C) shall come from the
institutions described in subclauses (I), (II), and (III) of
clause (i).
``(C) Funding from a small business concern.--The small
business concern (or its owners, stockholders, or affiliates)
receiving assistance through a body authorized by this title
shall provide--
``(i) at least 15 percent of the total cost of the project
financed, if the small business concern has been in operation
for a period of 2 years or less;
``(ii) at least 15 percent of the total cost of the project
financed if the project involves the construction of a
limited or single purpose building or structure;
``(iii) at least 20 percent of the total cost of the
project financed if the project involves both of the
conditions set forth in clauses (i) and (ii); or
``(iv) at least 10 percent of the total cost of the project
financed, in all other circumstances, at the discretion of
the development company.''.
(b) Guarantee Fee for Development Company Debentures.--
Section 503(b)(7)(A) (15 U.S.C. 697(b)(7)(A)) is amended by
striking ``0.125 percent'' and inserting ``0.8125 percent''.
(c) Fees To Offset Subsidy Cost.--Section 503(d) (15 U.S.C.
697(d)) is amended to read as follows:
``(d) Charges for Administration Expenses.--
``(1) Level of charges.--The Administration may impose an
additional charge for administrative expenses with respect to
each debenture for which payment of principal and interest is
guaranteed under subsection (a).
``(2) Participation fee.--The Administration shall also
impose a one-time fee of 50 basis points on the total
participation in any project of any institution described in
subclause (I), (II), or (III) of section 502(3)(B)(i). Such
fee shall be imposed only when the participation of the
institution will occupy a senior credit position to that of
the development company. Such fee shall be collected by the
development company, forwarded to the Administration, and
used to offset the cost (as such term is defined in section
502 of the Credit Reform Act of 1990) to the Administration
of making guarantees under subsection (a).
``(3) Development company fee.--The Administration shall
collect annually from each development company a fee of 0.125
percent of the outstanding principal balance of any
guaranteed debenture authorized by the Administration after
September 30, 1996. Such fee shall be derived from the
servicing fees collected by the development company pursuant
to regulation, and shall not be derived from any additional
fees imposed on small business concerns. All proceeds of the
fee shall be used to offset the cost (as such term is defined
in section 502 of the Credit Reform Act of 1990) to the
Administration of making guarantees under subsection (a).''.
(d) Effective Date.--Section 503 (15 U.S.C. 697) is amended
by adding at the end the following:
``(f) Effective Date.--The fees authorized by subsections
(b) and (c) shall apply to financings approved by the
Administration on or after October 1, 1996, but shall not
apply to financings approved by the Administration on or
after October 1, 1997.''.

SEC. 203. REQUIRED ACTIONS UPON DEFAULT.

Section 503 (15 U.S.C. 697) is amended by adding at the end
the following:
``(g) Required Actions Upon Default.--
``(1) Deadlines.--
``(A) Initial actions.--Not later than the 45th day after
the date on which a payment on a loan funded through a
debenture guaranteed under this section is due and not
received, the Administration shall--
``(i) take all necessary steps to bring such a loan
current; or
``(ii) implement a formal written deferral agreement.
``(B) Purchase or acceleration of debenture.--Not later
than the 65th day after the date on which a payment on a loan
described in subparagraph (A) is due and not received, and
absent a formal written deferral agreement, the
Administration shall take all necessary steps to purchase or
accelerate the debenture.
``(2) Prepayment penalties.--The Administration shall, with
respect to the portion of any project derived from funds set
forth in section 502(3)--
``(A) negotiate the elimination of any prepayment penalties
or late fees on defaulted loans made prior to September 30,
1996;
``(B) decline to pay any prepayment penalty or late fee on
the default based purchase of loans issued after September
30, 1996; and
``(C) for any project financed after September 30, 1996,
decline to pay any default interest rate higher than the
interest rate on the note prior to the date of default.''.

SEC. 204. LOAN LIQUIDATION PILOT PROGRAM.

(a) In General.--The Administrator shall carry out a loan
liquidation pilot program (in this section referred to as the
``pilot program'') in accordance with the requirements of
this section.
(b) Selection of Development Companies.--Not later than 90
days after the date of the enactment of this Act, the
Administrator shall allow not less than 15 development
companies authorized to make loans and issue debentures under
title V of the Small Business Investment Act of 1958 to
participate in the pilot program. The development companies
admitted shall agree not to take any action that would create
a potential conflict of interest involving the development
company, the third party lender, or an associate of the third
party lender. In order to qualify to participate in the
pilot, each development company shall--
(1) have a minimum of 6 years experience in the program
established by such title V;
(2) have made, during the last 6 fiscal years, an average
of 10 loans per year through the program established by such
title V; and
(3) have a minimum of 2 years experience, either
independently or through an agent, in liquidating loans under
the authority of a Federal, State, or other lending program.

[[Page H10087]]

(c) Authority of Development Companies.--The development
companies selected under subsection (b) shall, for all loans
in their portfolio of loans made through debentures
guaranteed under title V of the Small Business Investment Act
of 1958 that are in default after the date of enactment of
this Act, be authorized to--
(1) perform all liquidation and foreclosure functions,
including the acceleration or purchase of community injection
funds; and
(2) liquidate such loans in a reasonable and sound manner
and according to commercially accepted practices.
(d) Authority of the Administrator.--In carrying out the
pilot program, the Administrator shall--
(1) have full authority to deny participation in the pilot
program or rescind the authority granted any development
company under this section upon a 10-day written notice
stating the reasons for the denial or rescission; and
(2) implement the pilot program no later than 90 days after
the admission of the development companies specified in
subsection (b).
(e) Report.--
(1) In general.--The Administrator shall issue a report on
the results of the pilot program to the Committees on Small
Business of the House of Representatives and the Senate. The
report shall include information relating to--
(A) the total dollar amount of each loan and project
liquidated;
(B) the total dollar amount guaranteed by the
Administration;
(C) total dollar losses;
(D) total recoveries both as percentage of the amount
guaranteed and the total cost of the project; and
(E) a comparison of the pilot program information with the
same information for liquidation conducted outside the pilot
program over the period of time.
(2) Reporting period.--The report shall be based on data
from, and issued not later than 90 days after the close of,
the first eight 8 fiscal quarters of the pilot program's
operation after the date of implementation.

SEC. 205. REGISTRATION OF CERTIFICATES.

(a) Certificates Sold Pursuant to Small Business Act.--
Section 5(h) of the Small Business Act (15 U.S.C. 634(h)) is
amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D);
(2) by striking ``(h)'' and inserting ``(h)(1)'';
(3) by striking subparagraph (A), as redesignated by
paragraph (1) of this subsection, and inserting the
following:
``(A) provide for a central registration of all loans and
trust certificates sold pursuant to subsections (f) and (g)
of this section;''; and
(4) by adding at the end the following:
``(2) Nothing in this subsection shall prohibit the
utilization of a book-entry or other electronic form of
registration for trust certificates. The Administration may,
with the consent of the Secretary of the Treasury, use the
book-entry system of the Federal Reserve System.''.
(b) Certificates Sold Pursuant to Small Business Investment
Company Program.--Section 321(f) (15 U.S.C. 6871(f)) is
amended--
(1) in paragraph (1) by striking ``Such central
registration shall include'' and all that follows through the
period at the end of the paragraph; and
(2) by adding at the end the following:
``(5) Nothing in this subsection shall prohibit the use of
a book-entry or other electronic form of registration for
trust certificates.''.
(c) Certificates Sold Pursuant to Development Company
Program.--Section 505(f) (15 U.S.C. 697b(f)) is amended--
(1) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D);
(2) by striking ``(f)'' and inserting ``(f)(1)'';
(3) by striking subparagraph (A), as redesignated by
paragraph (1) of this subsection, and inserting the
following:
``(A) provide for a central registration of all trust
certificates sold pursuant to this section;'' and
(4) by adding at the end the following:
``(2) Nothing in this subsection shall prohibit the
utilization of a book-entry or other electronic form of
registration for trust certificates.''.

SEC. 206. PREFERRED SURETY BOND GUARANTEE PROGRAM.

(a) Admissions of Additional Program Participants.--Section
411(a) (15 U.S.C. 694(a)) is amended by adding a new
paragraph (5), as follows:
``(5)(A) The Administration shall promptly act upon an
application from a surety to participate in the Preferred
Surety Bond Guarantee Program, authorized by paragraph (3),
in accordance with criteria and procedures established in
regulations pursuant to subsection (d).
``(B) The Administration is authorized to reduce the
allotment of bond guarantee authority or terminate the
participation of a surety in the Preferred Surety Bond
Guarantee Program based on the rate of participation of such
surety during the 4 most recent fiscal year quarters compared
to the median rate of participation by the other sureties in
the program.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply with respect to applications received (or pending
substantive evaluation) on or after October 1, 1995.

The CHAIRMAN. Are there any amendments?

amendments offered by mrs. meyers of kansas

Mrs. MEYERS of Kansas. Mr. Chairman, I offer an en bloc amendment.
The Clerk read as follows:

Amendments offered by Mrs. Meyers of Kansas:
Page 7, line 24, strike ``3'' and insert ``5''.
Page 9, line 5, strike ``shall'' and insert ``may''.
Page 9, line 8, strike ``after August 1, 1996''.
Page 9, line 11, after ``lenders'' insert ``unless the
Administrator determines that the lender, on a case by case
basis, has undertaken other agreements which retain an
acceptable exposure to loss by the lender in the event of
default of a loan being securitized''.
Page 17, line 9, after ``percent'' insert ``but not to
exceed 7 per centum per annum''.
Page 33, line 18, strike ``0.8125'' and insert ``0.9375''.
Page 38, line 5, after ``funds'' insert ``, subject to such
company obtaining prior written approval from the
Administrator before committing the agency to purchase any
other indebtedness secured by the property: Provided, That
the Administrator shall approve or deny a request for such
purchase within a period of 5 business days''.
Page 38, line 8, after ``practices'' insert ``pursuant to a
liquidation plan approved by the Administrator in advance of
its implementation. If the Administrator does not approve or
deny a request made by a certified development company within
a period of 5 business days, such request shall be deemed to
be approved''.

Mrs. MEYERS of Kansas (during the reading). Mr. Chairman, I ask
unanimous consent that the amendments be considered as read and printed
in the Record.
The CHAIRMAN. Is there objection to the request of the gentlewoman
from Kansas?
There was no objection.
Mrs. MEYERS of Kansas. Mr. Chairman, the manager's amendment at the
desk is a compromise designed to remedy a few possible flaws in the
underlying bill. I want to thank the gentleman from New York [Mr.
LaFalce], the SBA, and the gentleman from Missouri [Mr. Talent], and
the gentleman from Texas [Mr. Bentsen], and others who have contributed
their time and assistance with this amendment, and I ask my colleagues
to support it.
Mr. Chairman, the amendment is very simple and I will briefly explain
its provisions.
In title I, it amends section 103 to extend the amount of time the
Small Business Administration has to respond to liquidation plans and
requests from certified lenders participating in the 7(a) loan program
from 3 days to 5. This change is added because the need was recognized
to give the SBA a little more time to respond to such requests.
The amendment also changes the securitization provision in section
103 to clarify the intent of the committee. Currently, non-bank lenders
in the 7(a) program may sell the nonguaranteed portion of their 7(a)
loans on the secondary market, thereby freeing up funds for further
much needed small business lending. Unfortunately, banks are not
accorded the same privileges. H.R. 3719 changes that and also requires
the SBA to determine whether a lender, bank or non-bank, needs to keep
a reserve. Mr. Talent and Mr. Bentsen felt that the language needed
further clarifications and we gladly accommodated that request in this
amendment.
In section 104 of H.R. 3719 the committee proposes an amendment to
place a limit of 7 percent on the interest rate charged for disaster
loans to homeowners and businesses without credit available elsewhere.
This cap is lower than the maximum interest rate of 8 percent charged
to those with credit available to them, but still reflects the
committee's desire to balance the need to control costs and our desire
to aid those afflicted by disasters.
The manager's amendment also amends section 203 to adjust the
increase in the fee imposed on borrowers in the section 504 loan
program. This adjustment is necessary to bring the subsidy rate for
this program down the last bit to achieve a zero subsidy rate. The
committee is not pleased with having to take these steps but our
alternative is to abandon a vital job creating program.
Finally, the amendment makes some further adjustments in the pilot
liquidation program for the certified development companies
participating in the 504 program. The amendments will require the
development companies to obtain SBA approval prior to obligating the
agency to purchasing any indebtedness needed to speed the liquidation
process. In addition, the amendment requires that development companies
file liquidation plans with the SBA to help the agency track the
progress and activities of the pilot program participants.

[[Page H10088]]

{time} 1445

Mr. LaFALCE. Mr. Chairman, I strongly support the manager's
amendment. I think it adds significantly to the merit of the bill. Most
importantly, I want to thank the gentlewoman from Kansas [Mrs. Meyers]
for being so gracious and so conciliatory in the discussions not only
of the bill but, most recently yesterday and today, the manager's
amendment. She was extremely conciliatory, and that made it so much
easier to come to the floor. I want to thank the gentlewoman again.
The CHAIRMAN. The question is on the amendments offered by the
gentlewoman from Kansas [Mrs. Meyers].
The amendments were agreed to.

amendment offered by mr. traficant

Mr. TRAFICANT. Mr. Chairman, I offer an amendment.
The Clerk read as follows:

Amendment offered by Mr. Traficant: At the end of title II
insert the following new section:
It is the sense of the Congress that the subsidy models
prepared by the Office of Management and Budget relative to
loan programs sponsored by the United States Small Business
Administration have a tendency to:
1. Overestimate potential risks of loss and;
2. Overemphasize historical losses that may be anomalous
and do not truly reflect the success of the programs as a
whole.
Consequently, Congress mandates the independent study in
Section 103(h) with hopes of improving the ability of the
Office of Management and Budget to more accurately reflect
the budgetary implications of such programs.

Mr. TRAFICANT (during the reading). Mr. Chairman, I ask unanimous
consent that the amendment be considered as read and printed in the
Record.
The CHAIRMAN. Is there objection to the request of the gentleman from
Ohio?
There was no objection.
Mr. TRAFICANT. Mr. Chairman, as I had stated in the general debate
and with the sound advice and counsel of the gentleman from New York
[Mr. LaFalce], our ranking Democrat, and the gentlewoman from Kansas
[Mrs. Meyers], our great chairwoman, I am concerned about some of the
pessimistic and at times incorrect assumptions that have been made by
the OMB. Let there be no mistake. I think especially with the 504
program it has caused problems.
I am a strong supporter of this bill, but my amendment really
reemphasizes the fact that in that independent study, section 103-H,
there are several new areas to be presented that the Congress is
looking at relative to OMB evaluations, and that is overestimation of
potential risks of loss, and at times an overemphasis on historical
losses that may not be necessarily accurate and truly reflect the
success of the programs as a whole.
Mr. Chairman, the 504 program is very important, as I said earlier, a
half-a-million jobs, 47,784 for Ohio. I think by some of their
estimates it has caused that program, the subsidy concern, to be
really, really problematic. So Members on both sides of the aisle in
Ohio joined forces with me. I brought it to our committees. All it does
is reemphasize what we have done, but it again emphasizes those
specific points that I think speak to this issue. And if it does not
resolve, we will basically handcuff communities from the 504 program.
So with that, I thank the gentlewoman for the time. I appreciate her
being so considerate. We have been working on this for some time, and I
am glad that this vehicle today is here and we can play a part in it
like this. I ask for my colleagues' support on this amendment.
Mrs. MEYERS of Kansas. Mr. Chairman, I move to strike the last word.
Mr. Chairman, I would just like to state that I have no objection to
the Traficant amendment. Indeed, it echoes the directive in H.R. 3719
to have an independent study of OMB's assumptions in subsidy rate
calculations. It certainly expresses the frustration that I think was
felt by me and the gentleman from New York [Mr. LaFalce] and the entire
committee over this year's subsidy rates. I do not think anybody was at
fault. But being told in October that the subsidy rate is one thing and
in March that it has changed dramatically made it difficult for all of
us. Therefore, I would be happy to accept the gentleman's amendment.
Mr. LaFALCE. Mr. Chairman, I move to strike the requisite number of
words.
Mr. Chairman, I support primarily the thrust of the amendment. I do
want to point out that I might have worded it a bit differently had I
drafted it, but I do not want to quibble on words. The thrust of it is
something I concur with.
This is not a case of shooting the messenger because of the message.
No, this is a case of really stating our puzzlement at this sudden
about-face and our wondering whether or not the underlying assumptions
of the reconsidered subsidy rate are truly valid. It is our way of
underscoring our desire to have the OMB not only come out and tell us
that something is dramatically different but showing us precisely what
their economic assumptions were to validate their new conclusions.
Mr. Chairman, I think it would have been helpful if they could have
done that. I think that this amendment will help ensure that they do
that in the future.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Ohio [Mr. Traficant].
The amendment was agreed to.
The CHAIRMAN. Are there further amendments to the bill?
If not, the question is on the committee amendment in the nature of a
substitute, as amended.
The committee amendment in the nature of a substitute, as amended,
was agreed to.
The CHAIRMAN. Under the rule, the Committee rises.
Accordingly the Committee rose; and the Speaker pro tempore (Mr.
Barrett of Nebraska) having assumed the chair, Mr. Collins of Georgia,
Chairman of the Committee of the Whole House on the State of the Union,
reported that that Committee, having had under consideration the bill
(H.R. 3719), to amend the Small Business Act and Small Business
Investment Act of 1958, pursuant to House Resolution 516, he reported
the bill back to the House with an amendment adopted by the Committee
of the Whole.
The SPEAKER pro tempore. Under the rule, the previous question is
ordered.
Is a separate vote demanded on any amendment to the committee
amendment in the nature of a substitute adopted by the Committee of the
Whole? If not, the question is on the amendment.
The amendment was agreed to.
The SPEAKER pro tempore. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed and read a third time and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. LaFALCE. Mr. Speaker, I object to the vote on the ground that a
quorum is not present and make the point of order that a quorum is not
present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
The vote was taken by electronic device, and there were--yeas 408,
nays 0, not voting 25, as follows:

[Roll No. 406]

YEAS--408

Abercrombie
Ackerman
Allard
Andrews
Archer
Armey
Bachus
Baesler
Baker (CA)
Baker (LA)
Baldacci
Ballenger
Barcia
Barr
Barrett (NE)
Barrett (WI)
Bartlett
Barton
Bass
Bateman
Becerra
Beilenson
Bentsen
Bereuter
Berman
Bevill
Bilbray
Bilirakis
Bishop
Bliley
Blumenauer
Blute
Boehlert
Boehner
Bonilla
Bonior
Bono
Borski
Boucher
Brewster
Browder
Brown (CA)
Brown (FL)
Brown (OH)
Brownback
Bryant (TN)
Bryant (TX)
Bunn
Bunning
Burr
Burton
Buyer
Callahan
Calvert
Camp
Campbell
Cardin
Castle
Chabot
Chambliss
Chapman
Chenoweth
Christensen
Clay
Clayton
Clement
Clinger
Clyburn
Coble
Coburn
Coleman
Collins (GA)
Collins (MI)
Combest
Condit
Cooley
Costello
Cox
Coyne
Cramer
Crane
Crapo
Cremeans
Cubin
Cummings
Cunningham
Danner
Davis
Deal
DeFazio
DeLauro
DeLay
Dellums
Diaz-Balart
Dickey
Dicks
Dingell
Dixon
Doggett
Doolittle
Dornan
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Ehrlich
English
Ensign
Eshoo
Evans
Everett
Ewing

[[Page H10089]]

Farr
Fattah
Fawell
Fazio
Fields (LA)
Filner
Flake
Flanagan
Foglietta
Foley
Forbes
Ford
Fowler
Fox
Frank (MA)
Franks (CT)
Franks (NJ)
Frelinghuysen
Frisa
Frost
Funderburk
Furse
Gallegly
Gejdenson
Gekas
Gephardt
Gilchrest
Gillmor
Gilman
Gonzalez
Goodlatte
Goodling
Gordon
Goss
Graham
Green (TX)
Greene (UT)
Greenwood
Gunderson
Gutierrez
Gutknecht
Hall (OH)
Hall (TX)
Hamilton
Hancock
Hastert
Hastings (FL)
Hastings (WA)
Hayworth
Hefley
Hefner
Heineman
Herger
Hilleary
Hilliard
Hinchey
Hobson
Hoekstra
Hoke
Holden
Horn
Hostettler
Houghton
Hoyer
Hunter
Hutchinson
Hyde
Inglis
Istook
Jackson (IL)
Jackson-Lee (TX)
Jacobs
Jefferson
Johnson (CT)
Johnson (SD)
Johnson, E. B.
Johnson, Sam
Johnston
Jones
Kanjorski
Kaptur
Kasich
Kelly
Kennedy (MA)
Kennedy (RI)
Kennelly
Kildee
Kim
King
Kleczka
Klink
Klug
Knollenberg
Kolbe
LaFalce
LaHood
Largent
Latham
LaTourette
Laughlin
Lazio
Leach
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Lightfoot
Lincoln
Linder
Lipinski
Livingston
LoBiondo
Lofgren
Longley
Lowey
Lucas
Luther
Maloney
Manton
Manzullo
Markey
Martinez
Martini
Mascara
Matsui
McCarthy
McCollum
McCrery
McDade
McDermott
McHale
McHugh
McInnis
McIntosh
McKeon
McKinney
McNulty
Meehan
Meek
Menendez
Metcalf
Meyers
Mica
Millender-McDonald
Miller (CA)
Miller (FL)
Minge
Mink
Moakley
Molinari
Mollohan
Montgomery
Moorhead
Moran
Morella
Murtha
Myers
Myrick
Neal
Nethercutt
Neumann
Ney
Norwood
Nussle
Oberstar
Obey
Olver
Ortiz
Orton
Owens
Oxley
Packard
Pallone
Parker
Pastor
Paxon
Payne (NJ)
Payne (VA)
Pelosi
Peterson (FL)
Peterson (MN)
Petri
Pickett
Pombo
Pomeroy
Porter
Portman
Poshard
Pryce
Quinn
Radanovich
Rahall
Ramstad
Rangel
Reed
Regula
Richardson
Riggs
Rivers
Roberts
Roemer
Rogers
Rohrabacher
Ros-Lehtinen
Roth
Roukema
Roybal-Allard
Royce
Rush
Sabo
Salmon
Sanders
Sawyer
Saxton
Scarborough
Schaefer
Schiff
Schroeder
Schumer
Scott
Seastrand
Sensenbrenner
Serrano
Shadegg
Shaw
Shays
Shuster
Sisisky
Skaggs
Skeen
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Solomon
Souder
Spence
Spratt
Stark
Stearns
Stenholm
Stockman
Stokes
Studds
Stump
Stupak
Talent
Tanner
Tate
Tauzin
Taylor (MS)
Taylor (NC)
Tejeda
Thomas
Thompson
Thornberry
Thornton
Thurman
Tiahrt
Torkildsen
Torres
Torricelli
Towns
Traficant
Upton
Velazquez
Vento
Visclosky
Volkmer
Vucanovich
Walker
Walsh
Wamp
Ward
Waters
Watt (NC)
Watts (OK)
Waxman
Weldon (FL)
Weldon (PA)
Weller
White
Whitfield
Wicker
Wilson
Wise
Wolf
Woolsey
Wynn
Yates
Young (FL)
Zimmer

NOT VOTING--25

Canady
Chrysler
Collins (IL)
Conyers
de la Garza
Deutsch
Dooley
Durbin
Engel
Fields (TX)
Ganske
Geren
Gibbons
Hansen
Harman
Hayes
Kingston
Lantos
Nadler
Quillen
Rose
Sanford
Williams
Young (AK)
Zeliff

{time} 1514

So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.

____________________