[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.

       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 Investment Act of 1958 
     (15 U.S.C. 661 et seq.).

     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.

                          ____________________