[House Report 111-499]
[From the U.S. Government Publishing Office]
111th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 111-499
======================================================================
TO CREATE THE SMALL BUSINESS LENDING FUND PROGRAM TO DIRECT THE
SECRETARY OF THE TREASURY TO MAKE CAPITAL INVESTMENTS IN ELIGIBLE
INSTITUTIONS IN ORDER TO INCREASE THE AVAILABILITY OF CREDIT FOR SMALL
BUSINESSES, AND FOR OTHER PURPOSES
_______
May 27, 2010.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 5297]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 5297) to create the Small Business Lending Fund
Program to direct the Secretary of the Treasury to make capital
investments in eligible institutions in order to increase the
availability of credit for small businesses, and for other
purposes, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 16
Background and Need for Legislation.............................. 16
Hearings......................................................... 18
Committee Consideration.......................................... 19
Committee Votes.................................................. 19
Committee Oversight Findings..................................... 26
Performance Goals and Objectives................................. 26
New Budget Authority, Entitlement Authority, and Tax Expenditures 26
Committee Cost Estimate.......................................... 26
Congressional Budget Office Estimate............................. 27
Federal Mandates Statement....................................... 30
Advisory Committee Statement..................................... 30
Constitutional Authority Statement............................... 30
Applicability to Legislative Branch.............................. 30
Earmark Identification........................................... 31
Section-by-Section Analysis of the Legislation................... 31
Dissenting Views................................................. 37
AMENDMENT
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
TITLE I--SMALL BUSINESS LENDING FUND
SECTION 1. SHORT TITLE.
This title may be cited as the ``Small Business Lending Fund Act of
2010''.
SEC. 2. PURPOSE.
The purpose of this title is to address the ongoing effects of the
financial crisis on small businesses by providing temporary authority
to the Secretary of the Treasury to make capital investments in
eligible institutions in order to increase the availability of credit
for small businesses.
SEC. 3. DEFINITIONS.
For purposes of this title:
(1) Appropriate committees of congress.--The term
``appropriate committees of Congress'' means--
(A) the Committee on Small Business and
Entrepreneurship, the Committee on Agriculture,
Nutrition, and Forestry, the Committee on Banking,
Housing, and Urban Affairs, the Committee on Finance,
the Committee on the Budget, and the Committee on
Appropriations of the Senate; and
(B) the Committee on Small Business, the Committee on
Agriculture, the Committee on Financial Services, the
Committee on Ways and Means, the Committee on the
Budget, and the Committee on Appropriations of the
House of Representatives.
(2) Appropriate federal banking agency.--The term
``appropriate Federal banking agency'' has the meaning given
such term under section 3(q) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(q)).
(3) Bank holding company.--The term ``bank holding company''
has the meaning given such term under section 2(a)(1) of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841(2)(a)(1)).
(4) Call report.--The term ``call report'' means--
(A) reports of Condition and Income submitted to the
Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, and the
Federal Deposit Insurance Corporation;
(B) the Office of Thrift Supervision Thrift Financial
Report; and
(C) any report that is designated by the Office of
the Comptroller of the Currency, the Board of Governors
of the Federal Reserve System, the Federal Deposit
Insurance Corporation, or the Office of Thrift
Supervision, as applicable, as a successor to any
report referred to in subparagraph (A) or (B).
(5) CDCI.--The term ``CDCI'' means the Community Development
Capital Initiative created by the Secretary under the Troubled
Asset Relief Program established by the Emergency Economic
Stabilization Act of 2008.
(6) CDCI investment.--The term ``CDCI investment'' means,
with respect to any eligible institution, the principal amount
of any investment made by the Secretary in such eligible
institution under the CDCI that has not been repaid.
(7) CPP.--The term ``CPP'' means the Capital Purchase Program
created by the Secretary under the Troubled Asset Relief
Program established by the Emergency Economic Stabilization Act
of 2008.
(8) CPP investment.--The term ``CPP investment'' means, with
respect to any eligible institution, the principal amount of
any investment made by the Secretary in such eligible
institution under the CPP that has not been repaid.
(9) Eligible institution.--The term ``eligible institution''
means--
(A) any insured depository institution, which--
(i) is not controlled by a bank holding
company or savings and loan holding company
that is also an eligible institution;
(ii) has total assets of equal to or less
than $10,000,000,000, as reported in the call
report as of the end of the fourth quarter of
calendar year 2009; and
(iii) is not directly or indirectly
controlled by any company or other entity that
has total consolidated assets of more than
$10,000,000,000, as so reported;
(B) any bank holding company which has total assets
of equal to or less than $10,000,000,000; and
(C) any savings and loan holding company which has
total assets of equal to or less than $10,000,000,000.
(10) Fund.--The term ``Fund'' means the Small Business
Lending Fund established by section 4(a)(1) of this title.
(11) Insured depository institution.--The term ``insured
depository institution'' has the meaning given such term under
section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1813(c)(2)).
(12) Program.--The term ``Program'' means the Small Business
Lending Fund Program authorized by section 4(a)(2) of this
title.
(13) Savings and loan holding company.--The term ``savings
and loan holding company'' has the meaning given such term
under section 10(a)(1)(D) of the Home Owners' Loan Act (12
U.S.C. 1467a(a)(1)(D)).
(14) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(15) Small business lending.--
(A) In general.--The term ``small business lending''
means small business lending, as defined by and
reported in an eligible institution's quarterly call
report, of the following types:
(i) Commercial and industrial loans plus.
(ii) Owner-occupied nonfarm, nonresidential
real estate loans.
(iii) Loans to finance agricultural
production and other loans to farmers.
(iv) Loans secured by farmland.
(B) Treatment of holding companies.--In the case of
eligible institutions that are bank holding companies
or savings and loan holding companies having one or
more insured depository institution subsidiaries, small
business lending shall be measured based on the
combined small business lending reported in the call
report of the insured depository institution
subsidiaries.
(16) Minority-owned and women-owned business.--The terms
``minority-owned business'' and ``women-owned business'' shall
have the meaning given the terms ``minority-owned business''
and ``women's business'', respectively, under section 21A(r)(4)
of the Federal Home Loan Bank Act (12 U.S.C. 1441A(r)(4)).
SEC. 4. SMALL BUSINESS LENDING FUND.
(a) Fund and Program.--
(1) Fund established.--There is established in the Treasury
of the United States a fund to be known as the ``Small Business
Lending Fund'', which shall be administered by the Secretary.
(2) Programs authorized.--The Secretary is authorized to
establish the Small Business Lending Fund Program for using the
Fund consistent with this title.
(b) Use of Fund.--
(1) In general.--Subject to paragraph (2), the Fund shall be
available to the Secretary, without further appropriation or
fiscal year limitation, for the costs of purchases (including
commitments to purchase), and modifications of such purchases,
of preferred stock and other financial instruments from
eligible institutions on such terms and conditions as are
determined by the Secretary in accordance with this title.
(2) Maximum purchase limit.--The aggregate amount of
purchases (and commitments to purchase) made pursuant to
paragraph (1) may not exceed $30,000,000,000.
(3) Proceeds used to pay down public debt.--All funds
received by the Secretary in connection with purchases made
pursuant to paragraph (1), including interest payments,
dividend payments, and proceeds from the sale of any financial
instrument, shall be paid into the general fund of the Treasury
for reduction of the public debt.
(c) Credits to the Fund.--There shall be credited to the Fund amounts
made available pursuant to section 9, to the extent provided by
appropriations Acts.
(d) Terms.--
(1) Application.--
(A) Institutions with assets of $1,000,000,000 or
less.--Eligible institutions having total assets equal
to or less than $1,000,000,000, as reported in a call
report as of the end of the fourth quarter of calendar
year 2009, may apply to receive a capital investment
from the Fund in an amount not exceeding 5 percent of
risk-weighted assets, as reported in the call report
immediately preceding the date of application, less the
amount of any CDCI investment and any CPP investment.
(B) Institutions with assets of more than
$1,000,000,000 and less than $10,000,000,000.--Eligible
institutions having total assets of more than
$1,000,000,000 but less than $10,000,000,000, as of the
end of the fourth quarter of calendar year 2009, may
apply to receive a capital investment from the Fund in
an amount not exceeding 3 percent of risk-weighted
assets, as reported in the call report immediately
preceding the date of application, less the amount of
any CDCI investment and any CPP investment.
(C) Treatment of holding companies.--In the case of
an eligible institution that is a bank holding company
or a savings and loan holding company having one or
more insured depository institution subsidiaries, total
assets shall be measured based on the combined total
assets reported in the call report of the insured
depository institution subsidiaries as of the end of
the fourth quarter of calendar year 2009 and risk-
weighted assets shall be measured based on the combined
risk-weighted assets of the insured depository
institution subsidiaries as reported in the call report
immediately preceding the date of application.
(D) Treatment of applicants that are institutions
controlled by holding companies.--If an eligible
institution that applies to receive a capital
investment under the Program is under the control of a
bank holding company or a savings and loan holding
company, then the Secretary may use the Fund to
purchase preferred stock or other financial instruments
from the top-tier bank holding company or savings and
loan holding company of such eligible institution, as
applicable. For purposes of this paragraph, the term
``control'' with respect to a bank holding company
shall have the same meaning as in section 2(a)(2) of
the Bank Holding Company Act of 1956 (12 U.S.C.
1841(2)(a)(2)). For purposes of this paragraph, the
term ``control'' with respect to a savings and loan
holding company shall have the same meaning as in
10(a)(2) of the Home Owners' Loan Act (12 U.S.C.
1467a(a)(2)).
(E) Requirement to provide a small business lending
plan.--At the time that an applicant submits an
application to the Secretary for a capital investment
under the Program, the applicant shall deliver to the
appropriate Federal banking agency a small business
lending plan describing how the applicant's business
strategy and operating goals will allow it to address
the needs of small businesses in the areas it serves.
This plan shall be confidential supervisory
information.
(2) Consultation with regulators.--For each eligible
institution that applies to receive a capital investment under
the Program, the Secretary shall consult with the appropriate
Federal banking agency for the eligible institution to
determine whether the eligible institution may receive such
capital investment.
(3) Ineligibility of institutions on fdic problem bank
list.--
(A) In general.--An eligible institution may not
receive any capital investment under the Program if--
(i) such institution is on the FDIC problem
bank list; or
(ii) such institution has been removed from
the FDIC problem bank list for less than 90
days.
(B) FDIC problem bank list defined.--For purposes of
this subparagraph, the term ``FDIC problem bank list''
means the list of institutions with a current rating of
4 or 5 under the Uniform Financial Institutions Rating
System, or such other list designated by the Federal
Deposit Insurance Corporation.
(4) Incentives to lend.--
(A) Requirements on preferred stock and other
financial instruments.--Any preferred stock or other
financial instrument issued to Treasury by an eligible
institution receiving a capital investment under the
Program shall provide that--
(i) the rate at which dividends or interest
are payable shall be 5 percent per annum
initially;
(ii) within the first 2 years after the date
of the capital investment under the Program,
the rate may be adjusted based on the amount of
an eligible institution's small business
lending. Changes in the amount of small
business lending shall be measured against the
amount of small business lending reported by
the eligible institution in its call report for
the last quarter in calendar year 2009 or the
average amount of small business lending
reported by the eligible institution in all
call reports for calendar year 2009, whichever
is lower, minus adjustments from each quarterly
balance in respect of--
(I) net loan charge offs with respect
to small business lending; and
(II) gains realized by the eligible
institution resulting from mergers,
acquisitions or purchases of loans
after origination and syndication;
which adjustments shall be determined
in accordance with guidance promulgated
by the Secretary; and
(iii) during any calendar quarter during the
initial 2-year period referred to in clause
(ii), an institution's rate shall be adjusted
to reflect the following schedule, based on
that institution's change in the amount of
small business lending relative to the
baseline--
(I) if the amount of small business
lending has increased by less than 2.5
percent, the dividend or interest rate
shall be 5 percent;
(II) if the amount of small business
lending has increased by 2.5 percent or
greater, but by less than 5.0 percent,
the dividend or interest rate shall be
4 percent;
(III) if the amount of small business
lending has increased by 5.0 percent or
greater, but by less than 7.5 percent,
the dividend or interest rate shall be
3 percent;
(IV) if the amount of small business
lending has increased by 7.5 percent or
greater, and but by less than 10.0
percent, the dividend or interest rate
shall be 2 percent; or
(V) if the amount of small business
lending has increased by 10 percent or
greater, the dividend or interest rate
shall be 1 percent.
(B) Basis of initial rate.--The initial dividend or
interest rate shall be based on call report data
published in the quarter immediately preceding the date
of the capital investment under the Program.
(C) Timing of rate adjustments.--Any rate adjustment
shall occur in the calendar quarter following the
publication of call report data, such that the rate
based on call report data from any one calendar
quarter, which is published in the first following
calendar quarter, shall be adjusted in that first
following calendar quarter and payable in the second
following quarter.
(D) Rate following initial 2-year period.--Generally,
the rate based on call report data from the eighth
calendar quarter after the date of the capital
investment under the Program shall be payable until the
expiration of the 4\1/2\-year period that begins on the
date of the investment. In the case where the amount of
small business lending has remained the same or
decreased relative to the institution's baseline in the
eighth quarter after the date of the capital investment
under the Program, the rate shall be 7 percent until
the expiration of the 4\1/2\-year period that begins on
the date of the investment.
(E) Rate following initial 4\1/2\-year period.--The
dividend or interest rate paid on any preferred stock
or other financial instrument issued by an eligible
institution that receives a capital investment under
the Program shall increase to 9 percent at the end of
the 4\1/2\-year period that begins on the date of the
capital investment under the Program.
(F) Limitation on rate reductions with respect to
certain amount.--The reduction in the dividend or
interest rate payable to Treasury by any eligible
institution shall be limited such that the rate
reduction shall not apply to a dollar amount of the
investment made by Treasury that is greater than the
dollar amount increase in the amount of small business
lending realized under this program. The Secretary may
issue guidelines that will apply to new capital
investments limiting the amount of capital available to
eligible institutions consistent with this limitation.
(G) Rate adjustments for s corporation.--Before
making a capital investment in an eligible institution
that is an S corporation or a corporation organized on
a mutual basis, the Secretary may adjust the dividend
or interest rate on the financial instrument to be
issued to the Secretary, from the dividend or interest
rate that would apply under subparagraphs (A) through
(F), to take into account any differential tax
treatment of securities issued by such eligible
institution. For purpose of this subparagraph, the term
``S corporation'' has the same meaning as in section
1361(a) of the Internal Revenue Code of 1986.
(H) Repayment deadline.--The capital investment
received by an eligible institution under the Program
shall be repaid by the end of the 10-year period that
begins on the date of the capital investment under the
Program.
(5) Additional incentives to repay.--The Secretary may, by
regulation or guidance issued under section 5(9), establish
repayment incentives in addition to the incentive in paragraph
(4)(E) that will apply to new capital investments in a manner
that the Secretary determines to be consistent with the
purposes of this title.
(6) Capital purchase program refinance.--
(A) In general.--The Secretary shall, in a manner
that the Secretary determines to be consistent with the
purposes of this title, issue regulations and other
guidance to permit eligible institutions to refinance
securities issued to Treasury under the CDCI and the
CPP for securities to be issued under the Program.
(B) Prohibition on participation by non-paying cpp
participants.--Subparagraph (A) shall not apply to any
eligible institution that has ever missed a dividend
payment due under the CPP.
(7) Minority outreach.--The Secretary shall require eligible
institutions receiving capital investments under the Program to
provide outreach and advertising in the appropriate language of
the applicant pool describing the availability and application
process of receiving loans from the eligible institution that
are made possible by the Program through the use of print,
radio, television or electronic media outlets which target
organizations, trade associations, and individuals that
represent or work within or are members of minority
communities.
(8) Additional terms.--The Secretary may, by regulation or
guidance issued under section 5(9), make modifications that
will apply to new capital investments in order to manage risks
associated with the administration of the Fund in a manner
consistent with the purposes of this title.
(9) Minimum underwriting standards.--The appropriate Federal
banking agency for an eligible institution that receives funds
under the Program shall within 60 days issue regulations
defining minimum underwriting standards that must be used for
loans made by the eligible institution using such funds.
SEC. 5. ADDITIONAL AUTHORITIES OF THE SECRETARY.
The Secretary may take such actions as the Secretary deems necessary
to carry out the authorities in this title, including, without
limitation, the following:
(1) The Secretary may use the services of any agency or
instrumentality of the United States or component thereof on a
reimbursable basis, and any such agency or instrumentality or
component thereof is authorized to provide services as
requested by the Secretary using all authorities vested in or
delegated to that agency, instrumentality, or component.
(2) The Secretary may enter into contracts, including
contracts for services authorized by section 3109 of title 5,
United States Code.
(3) The Secretary may designate any bank, savings
association, trust company, security broker or dealer, asset
manager, or investment adviser as a financial agent of the
Federal Government and such institution shall perform all such
reasonable duties related to this title as financial agent of
the Federal Government as may be required. The Secretary shall
have authority to amend existing agreements with financial
agents, entered into during the 2-year period before the date
of enactment of this title, to perform reasonable duties
related to this title.
(4) The Secretary may exercise any rights received in
connection with any preferred stock or other financial
instruments or assets purchased or acquired pursuant to the
authorities granted under this title.
(5) Subject to section 4(b)(3), the Secretary may manage any
assets purchased under this title, including revenues and
portfolio risks therefrom.
(6) The Secretary may sell, dispose of, transfer, exchange or
enter into securities loans, repurchase transactions, or other
financial transactions in regard to, any preferred stock or
other financial instrument or asset purchased or acquired under
this title, upon terms and conditions and at a price determined
by the Secretary.
(7) The Secretary may manage or prohibit conflicts of
interest that may arise in connection with the administration
and execution of the authorities provided under this title.
(8) The Secretary may establish and use vehicles, subject to
supervision by the Secretary, to purchase, hold, and sell
preferred stock or other financial instruments and issue
obligations.
(9) The Secretary may, in consultation with the Administrator
of the Small Business Administration, issue such regulations
and other guidance as may be necessary or appropriate to define
terms or carry out the authorities or purposes of this title.
SEC. 6. CONSIDERATIONS.
In exercising the authorities granted in this title, the Secretary
shall take into consideration--
(1) increasing the availability of credit for small
businesses;
(2) providing funding to eligible institutions that serve
small businesses that are minority- and women-owned and that
also serve low- and moderate-income, minority, and other
underserved or rural communities;
(3) protecting and increasing American jobs;
(4) ensuring that all eligible institutions may apply to
participate in the program established under this title,
without discrimination based on geography;
(5) providing transparency with respect to use of funds
provided under this title;
(6) minimizing the cost to taxpayers of exercising the
authorities; and
(7) promoting and engaging in financial education to would-be
borrowers.
SEC. 7. REPORTS.
The Secretary shall provide to the appropriate committees of
Congress--
(1) within 7 days of the end of each month commencing with
the first month in which transactions are made under the
Program, a written report describing all of the transactions
made during the reporting period pursuant to the authorities
granted under this title;
(2) after the end of March and the end of September,
commencing September 30, 2010, a written report on all
projected costs and liabilities, all operating expenses,
including compensation for financial agents, and all
transactions made by the Fund, which shall include
participating institutions and amounts each institution has
received under the Program; and
(3) within 7 days of the end of each month commencing with
the first month in which transactions are made under the
Program, a written report detailing how eligible institutions
participating in the Program have used the funds such
institutions received under the Program.
SEC. 8. OVERSIGHT AND AUDITS.
(a) Inspector General Oversight.--The Inspector General of the
Department of the Treasury shall conduct, supervise, and coordinate
audits and investigations of the purchase (and commitments to purchase)
of preferred stock and other financial instruments under the Program.
(b) GAO Audit.--The Comptroller General of the United States shall
perform an annual audit of the Program and issue a report to the
appropriate committees of Congress containing the results of such
audit.
SEC. 9. CREDIT REFORM; FUNDING.
(a) Credit Reform.--The cost of purchases of preferred stock and
other financial instruments made as capital investments under this
title shall be determined as provided under the Federal Credit Reform
Act of 1990 (2 U.S.C. 661 et seq.).
(b) Funds Made Available.--There are hereby authorized to be
appropriated, out of funds in the Treasury not otherwise appropriated,
such sums as may be necessary to pay the costs of $30,000,000,000 of
capital investments in eligible institutions, including the costs of
modifying such investments, and reasonable costs of administering the
program of making, holding, managing, and selling the capital
investments.
SEC. 10. TERMINATION AND CONTINUATION OF AUTHORITIES.
(a) Termination of Investment Authority.--The authority to make
capital investments in eligible institutions, including commitments to
purchase preferred stock or other instruments, provided under this
title shall terminate 1 year after the date of enactment of this title.
(b) Continuation of Other Authorities.--The authorities of the
Secretary in section 5 shall not be limited by the termination date in
subsection (a).
SEC. 11. PRESERVATION OF AUTHORITY.
Nothing in this title may be construed to limit the authority of the
Secretary under any other provision of law.
SEC. 12. ASSURANCES.
(a) Small Business Lending Fund Separate From TARP.--The Small
Business Lending Fund Program is established as separate and distinct
from the Troubled Asset Relief Program established by the Emergency
Economic Stabilization Act of 2008. An institution shall not, by virtue
of a capital investment under the Small Business Lending Fund Program,
be considered a recipient of the Troubled Asset Relief Program.
(b) Change in Law.--If, after a capital investment has been made in
an eligible institution under the Program, there is a change in law
that modifies the terms of the investment or program in a materially
adverse respect for the eligible institution, the eligible institution
may, after consultation with the appropriate Federal banking agency for
the eligible institution, repay the investment without impediment.
SEC. 13. STUDY AND REPORT WITH RESPECT TO WOMEN-OWNED AND MINORITY-
OWNED BUSINESSES.
(a) Study.--The Secretary shall conduct a study to determine the
number of women-owned businesses and minority-owned businesses that
receive assistance as a result of the Program, including--
(1) efforts, including technical assistance and outreach that
institutions have employed under the Program to provide loans
to minority- and women-owned small businesses;
(2) loan applications received;
(3) loan applications approved; and
(4) and any other relevant data related to such transactions
to promote the purposes of the Program as the Secretary may
require.
(b) Report.--Not later than one year after the date of enactment of
this Act, the Secretary shall submit to Congress a report on the
results of the study conducted pursuant to subsection (a).
(c) Information Provided to the Secretary.--Eligible institutions
that participate in the Program shall provide the Secretary with such
information as the Secretary may require to carry out the study
required by this section.
TITLE II--STATE SMALL BUSINESS CREDIT INITIATIVE
SEC. 201. SHORT TITLE.
This title may be cited as the ``State Small Business Credit
Initiative Act of 2010''.
SEC. 202. DEFINITIONS.
For purposes of this title, the following definitions shall apply:
(1) Appropriate federal banking agency.--The term
``appropriate Federal banking agency''--
(A) has the same meaning as in section 3 of the
Federal Deposit Insurance Act; and
(B) includes the National Credit Union Administration
Board in the case of any credit union the deposits of
which are insured in accordance with the Federal Credit
Union Act.
(2) Enrolled loan.--The term ``enrolled loan'' means a loan
made by a financial institution lender that is enrolled by a
participating State in an approved State capital access program
in accordance with this title.
(3) Federal contribution.--The term ``Federal contribution''
means the portion of the contribution made by a participating
State to, or for the account of, an approved State program that
is made with Federal funds allocated to the State by the
Secretary under section 203.
(4) Financial institution.--The term ``financial
institution'' means any insured depository institution, insured
credit union, or community development financial institution,
as those terms are each defined in section 103 of the Riegle
Community Development and Regulatory Improvement Act of 1994.
(5) Participating state.--The term ``participating State''
means any State that has been approved for participation in the
Program under section 204.
(6) Program.--The term ``Program'' means the State Small
Business Credit Initiative established under this title.
(7) Qualifying loan or swap funding facility.--The term
``qualifying loan or swap funding facility'' means a
contractual arrangement between a participating State and a
private financial entity under which--
(A) the participating State delivers funds to the
entity as collateral;
(B) the entity provides funding from the arrangement
back to the participating State; and
(C) the full amount of resulting funding from the
arrangement, less any fees and other costs of the
arrangement, is contributed to, or for the account of,
an approved State program.
(8) Reserve fund.--The term ``reserve fund'' means a fund,
established by a participating State, dedicated to a particular
financial institution lender, for the purposes of--
(A) depositing all required premium charges paid by
the financial institution lender and by each borrower
receiving a loan under an approved State program from
that financial institution lender;
(B) depositing contributions made by the
participating State, including State contributions made
with Federal contributions; and
(C) covering losses on enrolled loans by disbursing
accumulated funds.
(9) State.--The term ``State'' means--
(A) a State of the United States;
(B) the District of Columbia, the Commonwealth of
Puerto Rico, the Commonwealth of Northern Mariana
Islands, Guam, American Samoa, and the United States
Virgin Islands;
(C) when designated by a State of the United States,
a political subdivision of that State that the
Secretary determines has the capacity to participate in
the Program; and
(D) under the circumstances described in section
204(d), a municipality of a State of the United States
to which the Secretary has given a special permission
under section 204(d).
(10) State capital access program.--The term ``State capital
access program'' means a program of a State that--
(A) uses public resources to promote private access
to credit; and
(B) meets the eligibility criteria in section 205(c).
(11) State other credit support program.--The term ``State
other credit support program''--
(A) means a program of a State that--
(i) uses public resources to promote private
access to credit;
(ii) is not a State capital access program;
and
(iii) meets the eligibility criteria in
section 206(c); and
(B) includes, collateral support programs, loan
participation programs, and credit guarantee programs.
(12) State program.--The term ``State program'' means a State
capital access program or a State other credit support program.
(13) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
SEC. 203. FEDERAL FUNDS ALLOCATED TO STATES.
(a) Program Established; Purpose.--There is established the State
Small Business Credit Initiative (hereinafter in this title referred to
as the ``Program''), to be administered by the Secretary. Under the
Program, the Secretary shall allocate Federal funds to participating
States and make the allocated funds available to the participating
States as provided in this section for the uses described in this
section.
(b) Allocation Formula.--
(1) In general.--Not later than 30 days after the date of
enactment of this title, the Secretary shall allocate Federal
funds to participating States so that each State is eligible to
receive an amount equal to the average of the respective
amounts that the State--
(A) would receive under the 2009 allocation, as
determined under paragraph (2); and
(B) would receive under the 2010 allocation, as
determined under paragraph (3).
(2) 2009 allocation formula.--
(A) In general.--The Secretary shall determine the
2009 allocation by allocating Federal funds among the
States in the proportion that each such State's 2008
State employment decline bears to the aggregate of the
2008 State employment declines for all States.
(B) Minimum allocation.--The Secretary shall adjust
the allocations under subparagraph (A) for each State
to the extent necessary to ensure that no State
receives less than 0.9 percent of the Federal funds.
(C) 2008 state employment decline defined.--For
purposes of this paragraph and with respect to a State,
the term ``2008 State employment decline'' means the
excess (if any) of--
(i) the number of individuals employed in
such State determined for December 2007; over
(ii) the number of individuals employed in
such State determined for December 2008.
(3) 2010 allocation formula.--
(A) In general.--The Secretary shall determine the
2010 allocation by allocating Federal funds among the
States in the proportion that each such State's 2009
unemployment number bears to the aggregate of the 2009
unemployment numbers for all of the States.
(B) Minimum allocation.--The Secretary shall adjust
the allocations under subparagraph (A) for each State
to the extent necessary to ensure that no State
receives less than 0.9 percent of the Federal funds.
(C) 2009 unemployment number defined.--For purposes
of this paragraph and with respect to a State, the term
``2009 unemployment number'' means the number of
individuals within such State who were determined to be
unemployed by the Bureau of Labor Statistics for
December 2009.
(c) Availability of Allocated Amount.--The amount allocated by the
Secretary to each participating State under subsection (b) shall be
made available to the State as follows:
(1) Allocated amount generally to be available to state in
one-thirds.--
(A) In general.--The Secretary shall--
(i) apportion the participating State's
allocated amount into one-thirds;
(ii) transfer to the participating State the
first one-third when the Secretary approves the
State for participation under section 204; and
(iii) transfer to the participating State
each successive one-third when the State has
certified to the Secretary that it has
expended, transferred, or obligated 80 percent
of the last transferred one-third for Federal
contributions to, or for the account of, State
programs.
(B) Authority to withhold pending audit.--The
Secretary may withhold the transfer of any successive
one-third pending results of a financial audit.
(C) Transfers contingent on inspector general
audits.--
(i) In general.--Before a transfer to a
participating State of the second one-third or
the last one-third, the Inspector General of
the Department of the Treasury shall carry out
an audit of the participating State's use of
amounts already received.
(ii) Penalty for misstatement.--Any
participating State that is found to have
intentionally misstated any report issued to
the Secretary under the Program shall be
ineligible to receive any additional funds
under the Program. Funds that had been
allocated or that would otherwise have been
allocated to such participating State shall be
paid into the general fund of the Treasury for
reduction of the public debt.
(iii) Municipalities.--For purposes of this
subparagraph, the term ``participating State''
shall include a municipality given special
permission to participate in the Program,
pursuant to section 204(d).
(2) Transferred amounts.--Each amount transferred to a
participating State under this section shall remain available
to the State until used by the State as permitted under
paragraph (3).
(3) Use of transferred funds.--Each participating State may
use funds transferred to it under this section only--
(A) for making Federal contributions to, or for the
account of, an approved State program;
(B) as collateral for a qualifying loan or swap
funding facility;
(C) in the case of the first one-third transferred,
for paying administrative costs incurred by the State
in implementing an approved State program in an amount
not to exceed 5 percent of that first one-third; or
(D) in the case of each successive one-third
transferred, for paying administrative costs incurred
by the State in implementing an approved State program
in an amount not to exceed 3 percent of that successive
one-third.
(4) Termination of availability of amounts not transferred
within 2 years of participation.--Any portion of a
participating State's allocated amount that has not been
transferred to the State under this section by the end of the
2-year period beginning on the date that the Secretary approves
the State for participation may be deemed by the Secretary to
be no longer allocated to the State and no longer available to
the State and shall be returned to the General Fund of the
Treasury.
(5) Definitions.--For purposes of this section--
(A) the term ``allocated amount'' means the total
amount of Federal funds allocated by the Secretary
under subsection (b) to the participating State; and
(B) the term ``one-third'' means--
(i) in the case of the first and second one-
thirds, an amount equal to 33 percent of a
participating State's allocated amount; and
(ii) in the case of the last one-third, an
amount equal to 34 percent of a participating
State's allocated amount.
SEC. 204. APPROVING STATES FOR PARTICIPATION.
(a) Application.--Any State may apply to the Secretary for approval
to be a participating State under the Program and to be eligible for an
allocation of Federal funds under the Program.
(b) General Approval Criteria.--The Secretary shall approve a State
to be a participating State, if--
(1) a specific department, agency, or political subdivision
of the State has been designated to implement a State program
and participate in the Program;
(2) all legal actions necessary to enable such designated
department, agency, or political subdivision to implement a
State program and participate in the Program have been
accomplished;
(3) the State has filed an application with the Secretary for
approval of a State capital access program under section 205 or
approval as a State other credit support program under section
206, in each case within the time period provided in the
respective section; and
(4) the State and the Secretary have executed an allocation
agreement that--
(A) conforms to the requirements of this title;
(B) ensures that the State program complies with such
national standards as are established by the Secretary
under section 209(a)(2);
(C) sets forth internal control, compliance, and
reporting requirements as established by the Secretary,
and such other terms and conditions necessary to carry
out the purposes of this title, including an agreement
by the State to allow the Secretary to audit State
programs;
(D) requires that the State program be fully
positioned, within 90 days of the State's execution of
the allocation agreement with the Secretary, to act on
providing the kind of credit support that the State
program was established to provide; and
(E) includes an agreement by the State to deliver to
the Secretary, and update annually, a schedule
describing how the State intends to apportion among its
State programs the Federal funds allocated to the
State.
(c) Contractual Arrangements for Implementation of State Programs.--A
State may be approved to be a participating State, and be eligible for
an allocation of Federal funds under the Program, if the State has
contractual arrangements for the implementation and administration of
its State program with--
(1) an existing, approved State program administered by
another State; or
(2) an authorized agent of, or entity supervised by, the
State, including for-profit and not-for-profit entities.
(d) Special Permission.--
(1) Circumstances when a municipality may apply directly.--If
a State does not, within 60 days after the date of enactment of
this title, file with the Secretary a notice of its intent to
apply for approval by the Secretary of a State program or
within 9 months after the date of enactment of this title, file
with the Secretary a complete application for approval of a
State program, the Secretary may grant to municipalities of
that State a special permission that will allow them to apply
directly to the Secretary without the State for approval to be
participating municipalities.
(2) Timing requirements applicable to municipalities applying
directly.--To qualify for the special permission, a
municipality of a State must, within 12 months after the date
of enactment of this title, file with the Secretary a complete
application for approval by the Secretary of a State program.
(3) Notices of intent and applications from more than 1
municipality.--A municipality of a State may combine with 1 or
more other municipalities of that State to file a joint notice
of intent to file and a joint application.
(4) Approval criteria.--The general approval criteria in
paragraphs (2) and (4) shall apply.
(5) Allocation to municipalities.--
(A) If more than 3.--If more than 3 municipalities,
or combination of municipalities as provided in
paragraph (3), of a State apply for approval by the
Secretary to be participating municipalities under this
subsection, and the applications meet the approval
criteria in paragraph (4), the Secretary shall allocate
Federal funds to the 3 municipalities with the largest
populations.
(B) If 3 or fewer.--If 3 or fewer municipalities, or
combination of municipalities as provided in paragraph
(3), of a State apply for approval by the Secretary to
be participating municipalities under this subsection,
and the applications meet the approval criteria in
paragraph (4), the Secretary shall allocate Federal
funds to each applicant municipality or combination of
municipalities.
(6) Apportionment of allocated amount among participating
municipalities.--If the Secretary approves municipalities to be
participating municipalities under this subsection, the
Secretary shall apportion the full amount of the Federal funds
that are allocated to that State to municipalities that are
approved under this subsection in amounts proportionate to the
population of those municipalities, based on the most recent
available decennial census.
(7) Approving state programs for municipalities.--If the
Secretary approves municipalities to be participating
municipalities under this subsection, the Secretary shall take
into account the additional considerations in section 206(d) in
making the determination under section 205 or 206 that the
State program or programs to be implemented by the
participating municipalities, including a State capital access
program, is eligible for Federal contributions to, or for the
account of, the State program.
SEC. 205. APPROVING STATE CAPITAL ACCESS PROGRAMS.
(a) Application.--A participating State that establishes a new, or
has an existing, State capital access program that meets the
eligibility criteria in subsection (c) may apply to Secretary to have
the State capital access program approved as eligible for Federal
contributions to the reserve fund.
(b) Approval.--The Secretary shall approve such State capital access
program as eligible for Federal contributions to the reserve fund if--
(1) within 60 days after the date of enactment of this title,
the State has filed with the Secretary a notice of intent to
apply for approval by the Secretary of a State capital access
program;
(2) within 9 months after the date of enactment of this
title, the State has filed with the Secretary a complete
application for approval by the Secretary of a capital access
program;
(3) the State satisfies the requirements of subsections (a)
and (b) of section 204; and
(4) the State capital access program meets the eligibility
criteria in subsection (c).
(c) Eligibility Criteria for State Capital Access Programs.--For a
State capital access program to be approved under this section, it must
be a program of the State that--
(1) provides portfolio insurance for business loans based on
a separate loan-loss reserve fund for each financial
institution;
(2) requires insurance premiums to be paid by the financial
institution lenders and by the business borrowers to the
reserve fund to have their loans enrolled in the reserve fund;
(3) provides for contributions to be made by the State to the
reserve fund in amounts at least equal to the sum of the amount
of the insurance premium charges paid by the borrower and the
financial institution to the reserve fund for any newly
enrolled loan; and
(4) provides its portfolio insurance solely for loans that
meet both the following requirements:
(A) The borrower has 500 employees or less at the
time that the loan is enrolled in the Program.
(B) The loan amount does not exceed $5,000,000.
(d) Federal Contributions to Approved State Capital Access
Programs.--A State capital access program approved under this section
will be eligible for receiving Federal contributions to the reserve
fund in an amount equal to the sum of the amount of the insurance
premium charges paid by the borrowers and by the financial institution
to the reserve fund for loans that meet the requirements in subsection
(c)(4). A participating State may use the Federal contribution to make
its contribution to the reserve fund of an approved State capital
access program.
(e) Minimum Program Requirements for State Capital Access Programs.--
The Secretary shall, by regulation or other guidance, prescribe Program
requirements that meet the following minimum requirements:
(1) Experience and capacity.--The participating State shall
determine for each financial institution that participates in
the State capital access program, after consultation with the
appropriate Federal banking agency or, in the case of a
financial institution that is a non depository community
development financial institution, the Community Development
Financial Institution Fund, that the financial institution has
sufficient commercial lending experience and financial and
managerial capacity to participate in the approved State
capital access program. The determination by the State shall
not be reviewable by the Secretary.
(2) Investment authority.--Subject to applicable State law,
the participating State may invest, or cause to be invested,
funds held in a reserve fund by establishing a deposit account
at the financial institution lender in the name of the
participating State. In the event that funds in the reserve
fund are not deposited in such an account, such funds shall be
invested in a form that the participating State determines is
safe and liquid.
(3) Loan terms and conditions to be determined by
agreement.--A loan to be filed for enrollment in an approved
State capital access program may be made with such interest
rate, fees, and other terms and conditions, and the loan may be
enrolled in the approved State capital access program and
claims may be filed and paid, as agreed upon by the financial
institution lender and the borrower, consistent with applicable
law.
(4) Lender capital at-risk.--A loan to be filed for
enrollment in the State capital access program must require the
financial institution lender to have a meaningful amount of its
own capital resources at risk in the loan.
(5) Premium charges minimum and maximum amounts.--The
insurance premium charges payable to the reserve fund by the
borrower and the financial institution lender shall be
prescribed by the financial institution lender, within minimum
and maximum limits that require that the sum of the insurance
premium charges paid in connection with a loan by the borrower
and the financial institution lender may not be less than 2
percent nor more than 7 percent of the amount of the loan
enrolled in the approved State capital access program.
(6) State contributions.--In enrolling a loan in an approved
State capital access program, the participating State may make
a contribution to the reserve fund to supplement Federal
contributions made under this Program.
(7) Loan purpose.--
(A) Particular loan purpose requirements and
prohibitions.--In connection with the filing of a loan
for enrollment in an approved State capital access
program, the financial institution lender--
(i) shall obtain an assurance from each
borrower that--
(I) the proceeds of the loan will be
used for a business purpose;
(II) the loan will not be used to
finance such business activities as the
Secretary, by regulation, may proscribe
as prohibited loan purposes for
enrollment in an approved State capital
access program; and
(III) the borrower is not--
(aa) an executive officer,
director, or principal
shareholder of the financial
institution lender;
(bb) a member of the
immediate family of an
executive officer, director, or
principal shareholder of the
financial institution lender;
or
(cc) a related interest of
any such executive officer,
director, principal
shareholder, or member of the
immediate family;
(ii) shall provide assurances to the
participating State that the loan has not been
made in order to place under the protection of
the approved State capital access program prior
debt that is not covered under the approved
State capital access program and that is or was
owed by the borrower to the financial
institution lender or to an affiliate of the
financial institution lender;
(iii) shall not allow the enrollment of a
loan to a borrower that is a refinancing of a
loan previously made to that borrower by the
financial institution lender or an affiliate of
the financial institution lender; and
(iv) may include additional restrictions on
the eligibility of loans or borrowers that are
not inconsistent with the provisions and
purposes of this title, including compliance
with all applicable Federal and State laws,
regulations, ordinances, and Executive orders.
(B) Definitions.--For purposes of this subsection,
the terms ``executive officer'', ``director'',
``principal shareholder'', ``immediate family'', and
``related interest'' refer to the same relationship to
a financial institution lender as the relationship
described in part 215 of title 12 of the Code of
Federal Regulations, or any successor to such part.
SEC. 206. APPROVING COLLATERAL SUPPORT AND OTHER INNOVATIVE CREDIT
ACCESS AND GUARANTEE INITIATIVES FOR SMALL
BUSINESSES AND MANUFACTURERS.
(a) Application.--A participating State that establishes a new, or
has an existing, credit support program that meets the eligibility
criteria in subsection (c) may apply to the Secretary to have the State
other credit support program approved as eligible for Federal
contributions to, or for the account of, the State program.
(b) Approval.--The Secretary shall approve such State other credit
support program as eligible for Federal contributions to, or for the
account of, the program if--
(1) the Secretary determines that the State satisfies the
requirements of paragraphs (1) through (3) of section 205(b);
(2) the Secretary determines that the State other credit
support program meets the eligibility criteria in subsection
(c);
(3) the Secretary determines the State other credit support
program to be eligible based on the additional considerations
in subsection (d); and
(4) within 9 months after the date of enactment of this
title, the State has filed with Treasury a complete application
for Treasury approval.
(c) Eligibility Criteria for State Other Credit Support Programs.--
For a State other credit support program to be approved under this
section, it must be a program of the State that--
(1) can demonstrate that, at a minimum, 1 dollar of public
investment by the State program will cause and result in 1
dollar of new private credit;
(2) can demonstrate a reasonable expectation that, when
considered with all other State programs of the State, such
State programs together have the ability to use amounts of new
Federal contributions to, or for the account of, all such
programs in the State to cause and result in amounts of new
small business lending at least 10 times the new Federal
contribution amount;
(3) for those State other credit support programs that
provide their credit support through 1 or more financial
institution lenders, requires the financial institution lenders
to have a meaningful amount of their own capital resources at
risk in their small business lending; and
(4) extends credit support that--
(A) targets an average borrower size of 500 employees
or less;
(B) does not extend credit support to borrowers that
have more than 750 employees;
(C) targets support towards loans with an average
principal amount of $5,000,000 or less; and
(D) does not extend credit support to loans that
exceed a principal amount of $20,000,000.
(d) Additional Considerations.--In making a determination that a
State other credit support program is eligible for Federal
contributions to, or for the account of, the State program, the
Secretary shall take into account the following additional
considerations:
(1) The anticipated benefits to the State, its businesses,
and its residents to be derived from the Federal contributions
to, or for the account of, the approved State other credit
support program, including the extent to which resulting small
business lending will expand economic opportunities.
(2) The operational capacity, skills, and experience of the
management team of the State other credit support program.
(3) The capacity of the State other credit support program to
manage increases in the volume of its small business lending.
(4) The internal accounting and administrative controls
systems of the State other credit support program, and the
extent to which they can provide reasonable assurance that
funds of the State program are safeguarded against waste, loss,
unauthorized use, or misappropriation.
(5) The soundness of the program design and implementation
plan of the State other credit support program.
(e) Federal Contributions to Approved State Other Credit Support
Programs.--A State other credit support program approved under this
section will be eligible for receiving Federal contributions to, or for
the account of, the State program in an amount consistent with the
schedule describing the apportionment of allocated Federal funds among
State programs delivered by the State to the Secretary under the
allocation agreement.
(f) Minimum Program Requirements for State Other Credit Support
Programs.--
(1) Fund to prescribe.--The Secretary shall, by regulation or
other guidance, prescribe Program requirements for approved
State other credit support programs.
(2) Considerations for fund.--In prescribing minimum Program
requirements for approved State other credit support programs,
the Secretary shall take into consideration, to the extent the
Secretary determines applicable and appropriate, the minimum
Program requirements for approved State capital access programs
in section 205(e).
SEC. 207. REPORTS.
(a) Quarterly Use-of-funds Report.--
(1) In general.--Not later than 30 days after the beginning
of each calendar quarter, beginning after the first full
calendar quarter to occur after the date the Secretary approves
a State for participation, the participating State shall submit
to the Secretary a report on the use of Federal funding by the
participating State during the previous calendar quarter.
(2) Report contents.--The report shall--
(A) indicate the total amount of Federal funding used
by the participating State;
(B) include a certification by the participating
State that--
(i) the information provided in accordance
with subparagraph (A) is accurate;
(ii) funds continue to be available and
legally committed to contributions by the State
to, or for the account of, approved State
programs, less any amount that has been
contributed by the State to, or for the account
of, approved State programs subsequent to the
State being approved for participation in the
Program; and
(iii) the participating State is implementing
its approved State program or programs in
accordance with this title and regulations
issued pursuant to section 210.
(b) Annual Report.--Not later than March 31 of each year, beginning
March 31, 2011, each participating State shall submit to the Secretary
an annual report that shall include the following information:
(1) The number of borrowers that received new loans
originated under the approved State program or programs after
the State program was approved as eligible for Federal
contributions.
(2) The total amount of such new loans.
(3) Breakdowns by industry type, loan size, annual sales, and
number of employees of the borrowers that received such new
loans.
(4) The zip code of each borrower that received such a new
loan.
(5) Such other data as the Secretary, in the Secretary's sole
discretion, may require to carry out the purposes of the
Program.
(c) Form.--The reports and data filed pursuant to subsections (a) and
(b) shall be in such form as the Secretary, in the Secretary's sole
discretion, may require.
(d) Termination of Reporting Requirements.--The requirement to submit
reports under subsections (a) and (b) shall terminate for a
participating State with the submission of the completed reports due on
the first March 31 to occur after 5 complete 12-month periods after the
State is approved by the Secretary to be a participating State.
SEC. 208. REMEDIES FOR STATE PROGRAM TERMINATION OR FAILURES.
(a) Remedies.--
(1) In general.--If any of the events listed in paragraph (2)
occur, the Secretary, in the Secretary's discretion, may--
(A) reduce the amount of Federal funds allocated to
the State under the Program; or
(B) terminate any further transfers of allocated
amounts that have not yet been transferred to the
State.
(2) Causal events.--The events referred to in paragraph (1)
are--
(A) termination by a participating State of its
participation in the Program;
(B) failure on the part of a participating State to
submit complete reports under section 207 on a timely
basis; or
(C) noncompliance by the State with the terms of the
allocation agreement between the Secretary and the
State.
(b) Deallocated Amounts to Be Reallocated.--If, after 13 months, any
portion of the amount of Federal funds allocated to a participating
State is deemed by the Secretary to be no longer allocated to the State
after actions taken by the Secretary under subsection (a)(1), the
Secretary shall reallocate that portion among the participating States,
excluding the State whose allocated funds were deemed to be no longer
allocated, as provided in section 203(b).
SEC. 209. IMPLEMENTATION AND ADMINISTRATION.
(a) General Authorities and Duties.--The Secretary shall--
(1) consult with the Administrator of the Small Business
Administration and the appropriate Federal banking agencies on
the administration of the Program;
(2) establish minimum national standards for approved State
programs;
(3) provide technical assistance to States for starting State
programs and generally disseminate best practices;
(4) manage, administer, and perform necessary program
integrity functions for the Program; and
(5) ensure adequate oversight of the approved State programs,
including oversight of the cash flows, performance, and
compliance of each approved State program.
(b) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary, out of funds in the Treasury not
otherwise appropriated, $2,000,000,000 to carry out the Program,
including to pay reasonable costs of administering the Program.
(c) Termination of Secretary's Program Administration Functions.--The
authorities and duties of the Secretary to implement and administer the
Program shall terminate at the end of the 7-year period beginning on
the date of enactment of this title.
SEC. 210. REGULATIONS.
The Secretary, in consultation with the Administrator of the Small
Business Administration, shall issue such regulations and other
guidance as the Secretary determines necessary or appropriate to
implement this title including, but not limited to, to define terms, to
establish compliance and reporting requirements, and such other terms
and conditions necessary to carry out the purposes of this title.
SEC. 211. OVERSIGHT AND AUDITS.
(a) Inspector General Oversight.--The Inspector General of the
Department of the Treasury shall conduct, supervise, and coordinate
audits and investigations of the use of funds made available under the
Program.
(b) GAO Audit.--The Comptroller General of the United States shall
perform an annual audit of the Program and issue a report to the
appropriate committees of Congress, as such term is defined under
section 3(1), containing the results of such audit.
PURPOSE AND SUMMARY
H.R. 5297 establishes the Small Business Lending Fund
(``SBLF''), which is intended to boost small business lending
by providing additional capital to depository institutions with
assets of $10 billion or less. H.R. 5297 also creates the State
Small Business Credit Initiative, which will allocate funding
to states to support Capital Access Programs and a range of
other credit support programs. Both the SBLF and the State
Initiative will be administered by the U.S. Department of
Treasury (Treasury).
BACKGROUND AND NEED FOR LEGISLATION
There has been a dramatic decrease in the amount of bank
lending in the past several quarters. On May 20, 2010, the
Federal Deposit Insurance Corporation (FDIC) released its
Quarterly Banking Profile for the first quarter of 2010. The
report shows that commercial and industrial loans declined for
the seventh straight quarter, down more than 17 percent from
the year before.\1\
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\1\FDIC Press Release, ``FDIC-Insured Institution Report Earnings
of $914 Million in Fourth Quarter of 2009,'' February 23, 2010,
www.fdic.gov/news/news/press/2010/pr10036.html (FDIC Quarterly Report
Press Release).
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Many companies, particularly small businesses, claim that
it is becoming harder to get new loans to keep their business
operating and that banks are tightening requirements or cutting
off existing lines of credit even when the businesses are up to
date on their loan repayments.\2\ Treasury Secretary Timothy F.
Geithner recently acknowledged the problem encountered by some
banks, both healthy and troubled, which have been told to
maintain capital levels in excess of those required to be
considered well capitalized.\3\ Some banks say they have little
choice but to scale back lending, even to creditworthy
borrowers, and the most recent Federal Reserve data shows banks
are continuing to tighten lending terms for small
businesses.\4\
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\2\Michael McKee, ``In this Recovery, Small Business Falls
Behind,'' BusinessWeek, February 11, 2010. Available at:
www.businessweek.com/magazine/content/10_08/b4167016988043.htm.
\3\Crittenden, Michael and Tom Barkley ``Regulators Urge Bank Loans
to Small Businesses,'' Wall Street Journal, February 6, 2010. Available
at: online.wsj.com/article/
SB10001424052748703894304575047450391341316.html.
\4\``The April 2010 Senior Loan Officer Opinion Survey on Bank
Lending Practices'' Federal Reserve Board of Governors, released May 3,
2010. Available at: www.federalreserve.gov/boarddocs/SnLoanSurvey/
201005/default.htm.
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In January 2010, the Obama Administration announced a
number of initiatives designed to increase credit availability
to small business and otherwise support small businesses. The
Administration sent to Congress draft legislation to establish
the SBLF on May 7, 2010. On that date, the Administration also
sent to Congress draft legislation to establish the State Small
Business Credit Initiative.
Title I of H.R. 5297 establishes the SBLF. This fund is
intended to address the ongoing effects of the financial crisis
on small businesses by providing temporary authority to the
Secretary of the Treasury to make capital investments in
eligible institutions in order to increase the availability of
credit for small businesses. H.R. 5297 authorizes
appropriations to be used by the Treasury to provide up to $30
billion in capital to banks and savings associations with
assets of less than $10 billion and to their parent holding
companies, provided they also have assets of less than $10
billion. All banks, savings associations and holding companies
must be approved by Treasury to participate in the program.
Under the program, participating institutions will pay
dividend rates for the capital investment that are designed to
encourage small business lending. The initial dividend rate an
institution will pay for the capital investment is 5 percent.
That rate will decrease as the institution increases the amount
of small business lending it makes, and can go to as low as 1
percent. If the institution does not increase its small
business lending after two years, the dividend rate will
increase to 7 percent. After 4\1/2\ years, the dividend rate
for all participating institutions, regardless of their level
of small business lending, increases to 9 percent.
Title II of H.R. 5297 establishes the State Small Business
Credit Initiative (State Initiative). The bill authorizes
appropriations of up to $2 billion to be used by Treasury to
allocate funding directly to states that will be used in state
and municipal programs that support access to credit by
businesses. Treasury will allocate funds to approved programs
using an average of the formula used in the Recovery Zone Bond
program in the American Recovery and Reinvestment Act (ARRA)
and the more recent Recovery Zone Bond formula used in the
House-passed Small Business and Infrastructure Jobs Tax Act of
2010. The ARRA formula takes into account a state's job losses
in 2008 in proportion to the aggregate job losses of all states
in 2008, and the Small Business and Infrastructure Jobs Tax Act
formula uses the same comparison using 2009 numbers. Each state
is guaranteed a minimum allocation of 0.9 percent.
Treasury is directed to disburse the funds in one-third
increments. States can only use federal funds for approved
state lending programs and paying administrative costs.
Administrative costs are capped at 5 percent for the first
third and 3 percent for the remaining funds. Any state
allocation not transferred to the state within two years goes
back to the general fund administered by Treasury.
Introduction of the Bill
H.R. 5297 was originally introduced on May 13, 2010, and
was based on legislation that was drafted by the Obama
Administration. On the same day, H.R. 5302, the State Small
Business Credit Initiative Act of 2010, was introduced. This
bill also was based on legislation that was drafted by the
Obama Administration.
HEARINGS
The Committee on Financial Services held a hearing on May
18, 2010, entitled ``Initiatives to Promote Small Business
Lending, Jobs and Economic Growth''. The following witnesses
testified:
Mr. Gene B. Sperling, Counselor to the Secretary of the
Treasury, U.S. Department of the Treasury
The Honorable Christian S. Johansson, Secretary, Maryland
Department of Business and Economic Development
Mr. Paul Brown, Manager, Capital Markets Development,
Michigan Economic Development Corporation
The Honorable Paul Atkins, Member of the Congressional
Oversight Panel and former Securities and Exchange Commissioner
Mr. James MacPhee, Chief Executive Officer, Kalamazoo
County State Bank on behalf of Independent Community Bankers of
America
The Honorable Daniel A. Mica, President and Chief Executive
Officer, Credit Union National Association
Mr. Jim Determan, Hord Coplan Macht, Inc. on behalf of The
American Institute of Architects
In addition, on February 26, 2010, the Financial Services
Committee and the Committee on Small Business held a joint
hearing entitled ``The Condition of Small Business and
Commercial Real Estate Lending in Local Markets.'' This hearing
focused on small business lending issues, including President
Obama's announced initiative to establish the SBLF. The
following witnesses provided testimony:
Panel One
Mr. David Turnbull, Brighton Corporation, Boise,
Idaho
Ms. Margot Dorfman, Chief Executive Officer, U.S.
Women's Chamber of Commerce
Mr. Steve Gordon, President, Instant-Off, Inc.
Mr. Todd J. Zywicki, Foundation Professor of Law,
George Mason University
Mr. Wes Smith, President of E&E Manufacturing,
Plymouth, Michigan on behalf of the Motor & Equipment
Manufacturers Association
Panel Two
The Honorable Herbert M. Allison, Jr., Assistant
Secretary for Financial Stability and Counselor to the
Secretary, U.S. Department of the Treasury
The Honorable Karen G. Mills, Administrator, U.S.
Small Business Administration
The Honorable Elizabeth Duke, Governor, Board of
Governors of the Federal Reserve System
The Honorable Sheila C. Bair, Chairman, Federal
Deposit Insurance Corporation
The Honorable John C. Dugan, Comptroller, Office
of the Comptroller of the Currency
Mr. John E. Bowman, Acting Director, Office of
Thrift Supervision
Panel Three
Mr. Stephen G. Andrews, President and Chief
Executive Officer, Bank of Alameda, Alameda, California, on
behalf of the Independent Community Bankers of America
Mr. David Bridgeman, Pinnacle Bank, Orange County,
Florida
Mr. William Grant, Chairman and Chief Executive
Officer, First United Bank & Trust on behalf of the American
Bankers Association
Mr. Ronald Covey, President and Chief Executive
Officer, St. Mary's Bank, Manchester, New Hampshire on behalf
of the Credit Union National Association
Mr. Rick Wieczorek, President and Chief Executive
Officer, Mid-Atlantic Federal Credit Union on behalf of the
National Association of Federal Credit Unions
Ms. Cathleen H. Nash, President and Chief
Executive Officer, Citizens Republic Bancorp, Michigan on
behalf of Consumer Bankers Association
Mr. David A. Hoyt, Senior Executive Vice
President, Wholesale Banking, Wells Fargo & Company
Mr. Charles McCusker, Co-Managing Partner Patriot
Capital, L.P. on behalf of NASBIC
Ms. Sally Robertson, Business Finance Group Inc.,
Fairfax County, Virginia on behalf of the National Association
of Development Companies
COMMITTEE CONSIDERATION
The Committee on Financial Services met in open session on
May 19, 2010, and ordered H.R. 5297, the Small Business Lending
Fund Act of 2010, as amended, favorably reported to the House
by a record vote of 42 yeas and 23 nays.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Frank to report the bill, as amended, to the
House with a favorable recommendation was agreed to by a record
vote of 42 yeas and 23 nays (Record vote no. FC-124). The names
of Members voting for and against follow:
RECORD VOTE NO. FC-124
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ ........ .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... ........ X .........
Mrs. Maloney................... X ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. X ........ ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... X ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... X ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... X ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ ........ .........
Mr. Cleaver.................... X ........ ......... Mrs.Bachmann..... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ X .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... X ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ ........ X .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ ........ X .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Ms. Speier..................... X ........ .........
Mr. Childers................... X ........ .........
Mr. Minnick.................... X ........ .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... X ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... X ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
During the consideration of the bill, the following
amendments were disposed of by record votes. The names of
Members voting for and against follow:
An amendment by Mr. Garrett (NJ), no. 4, relating to the
effective date, was not agreed to by a record vote of 19 yeas
and 37 nays (Record vote no. FC-118):
RECORD VOTE NO. FC-118
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... ........ ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ ........ ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ ........ ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... ........ ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... ........ ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... ........ ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... ........ ........ .........
Mr. Cleaver.................... ........ X ......... Mrs.Bachmann..... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ ........ ......... Mr. McCarthy..... ........ ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ ........ .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ ........ .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Peters, no. 7, regarding a state small
business credit initiative, as amended by an amendment by Mrs.
Bachmann, no. 7a, making transfers contingent on Inspector
General audits, was agreed to by a record vote of 39 yeas and
23 nays (Record vote no. FC-119):
RECORD VOTE NO. FC-119
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... X ........ ......... Mr. Bachus....... ........ ........ .........
Mr. Kanjorski.................. X ........ ......... Mr. Castle....... ........ X .........
Ms. Waters..................... X ........ ......... Mr. King (NY).... ........ X .........
Mrs. Maloney................... ........ ........ ......... Mr. Royce........ ........ X .........
Mr. Gutierrez.................. X ........ ......... Mr. Lucas........ ........ X .........
Ms. Velazquez.................. X ........ ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... X ........ ......... Mr. Manzullo..... ........ X .........
Mr. Ackerman................... X ........ ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... X ........ ......... Mrs. Biggert..... ........ X .........
Mr. Meeks...................... X ........ ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. X ........ ......... Mrs. Capito...... ........ X .........
Mr. Capuano.................... X ........ ......... Mr. Hensarling... ........ X .........
Mr. Hinojosa................... X ........ ......... Mr. Garrett (NJ). ........ X .........
Mr. Clay....................... X ........ ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. X ........ ......... Mr. Gerlach...... ........ X .........
Mr. Baca....................... X ........ ......... Mr. Neugebauer... ........ X .........
Mr. Lynch...................... X ........ ......... Mr. Price (GA)... ........ X .........
Mr. Miller (NC)................ X ........ ......... Mr. McHenry...... ........ X .........
Mr. Scott...................... X ........ ......... Mr. Campbell..... ........ X .........
Mr. Green...................... X ........ ......... Mr. Putnam....... ........ ........ .........
Mr. Cleaver.................... X ........ ......... Mrs.Bachmann..... ........ X .........
Ms. Bean....................... X ........ ......... Mr. Marchant..... ........ X .........
Ms. Moore (WI)................. X ........ ......... Mr. McCotter..... ........ X .........
Mr. Hodes...................... ........ ........ ......... Mr. McCarthy..... ........ X .........
Mr. Ellison.................... X ........ ......... Mr. Posey........ ........ X .........
Mr. Klein...................... X ........ ......... Ms. Jenkins...... ........ X .........
Mr. Wilson..................... X ........ ......... Mr. Lee.......... ........ X .........
Mr. Perlmutter................. X ........ ......... Mr. Paulsen...... ........ X .........
Mr. Donnelly................... X ........ ......... Mr. Lance........ ........ X .........
Mr. Foster..................... X ........ .........
Mr. Carson..................... X ........ .........
Ms. Speier..................... X ........ .........
Mr. Childers................... X ........ .........
Mr. Minnick.................... X ........ .........
Mr. Adler...................... X ........ .........
Ms. Kilroy..................... X ........ .........
Mr. Driehaus................... X ........ .........
Ms. Kosmas..................... X ........ .........
Mr. Grayson.................... X ........ .........
Mr. Himes...................... ........ ........ .........
Mr. Peters..................... X ........ .........
Mr. Maffei..................... X ........ .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Price, no. 9, requiring offsets, was
not agreed to by a record vote of 23 yeas and 41 nays (Record
vote no. FC-120):
RECORD VOTE NO. FC-120
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... ........ ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ X ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... ........ ........ .........
Mr. Cleaver.................... ........ X ......... Mrs.Bachmann..... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ ........ ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling (and Mr. Lance), no. 13,
regarding TARP Special Inspector General oversight, was not
agreed to by a record vote of 23 yeas and 42 nays (Record vote
no. FC-121):
RECORD VOTE NO. FC-121
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... ........ ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ X ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... ........ ........ .........
Mr. Cleaver.................... ........ X ......... Mrs.Bachmann..... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mrs. Biggert (and Messrs. Paulsen, Castle,
Gerlach and King (NY)), no. 17, relating to the effective date,
was not agreed to by a record vote of 23 yeas and 42 nays
(Record vote no. FC-122):
RECORD VOTE NO. FC-122
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... ........ ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ X ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... ........ ........ .........
Mr. Cleaver.................... ........ X ......... Mrs.Bachmann..... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
An amendment by Mr. Hensarling, no. 23, extensions of
credit to creditworthy persons, was not agreed to by a record
vote of 23 yeas and 42 nays (Record vote no. FC-123):
RECORD VOTE NO. FC-123
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Frank...................... ........ X ......... Mr. Bachus....... ........ ........ .........
Mr. Kanjorski.................. ........ X ......... Mr. Castle....... X ........ .........
Ms. Waters..................... ........ X ......... Mr. King (NY).... X ........ .........
Mrs. Maloney................... ........ X ......... Mr. Royce........ X ........ .........
Mr. Gutierrez.................. ........ X ......... Mr. Lucas........ X ........ .........
Ms. Velazquez.................. ........ X ......... Mr. Paul......... ........ ........ .........
Mr. Watt....................... ........ X ......... Mr. Manzullo..... X ........ .........
Mr. Ackerman................... ........ X ......... Mr. Jones........ ........ ........ .........
Mr. Sherman.................... ........ X ......... Mrs. Biggert..... X ........ .........
Mr. Meeks...................... ........ X ......... Mr. Miller (CA).. ........ ........ .........
Mr. Moore (KS)................. ........ X ......... Mrs. Capito...... X ........ .........
Mr. Capuano.................... ........ X ......... Mr. Hensarling... X ........ .........
Mr. Hinojosa................... ........ X ......... Mr. Garrett (NJ). X ........ .........
Mr. Clay....................... ........ X ......... Mr. Barrett (SC). ........ ........ .........
Mrs. McCarthy.................. ........ X ......... Mr. Gerlach...... X ........ .........
Mr. Baca....................... ........ X ......... Mr. Neugebauer... X ........ .........
Mr. Lynch...................... ........ X ......... Mr. Price (GA)... X ........ .........
Mr. Miller (NC)................ ........ X ......... Mr. McHenry...... X ........ .........
Mr. Scott...................... ........ X ......... Mr. Campbell..... X ........ .........
Mr. Green...................... ........ X ......... Mr. Putnam....... ........ ........ .........
Mr. Cleaver.................... ........ X ......... Mrs.Bachmann..... X ........ .........
Ms. Bean....................... ........ X ......... Mr. Marchant..... X ........ .........
Ms. Moore (WI)................. ........ X ......... Mr. McCotter..... X ........ .........
Mr. Hodes...................... ........ X ......... Mr. McCarthy..... X ........ .........
Mr. Ellison.................... ........ X ......... Mr. Posey........ X ........ .........
Mr. Klein...................... ........ X ......... Ms. Jenkins...... X ........ .........
Mr. Wilson..................... ........ X ......... Mr. Lee.......... X ........ .........
Mr. Perlmutter................. ........ X ......... Mr. Paulsen...... X ........ .........
Mr. Donnelly................... ........ X ......... Mr. Lance........ X ........ .........
Mr. Foster..................... ........ X .........
Mr. Carson..................... ........ X .........
Ms. Speier..................... ........ X .........
Mr. Childers................... ........ X .........
Mr. Minnick.................... ........ X .........
Mr. Adler...................... ........ X .........
Ms. Kilroy..................... ........ X .........
Mr. Driehaus................... ........ X .........
Ms. Kosmas..................... ........ X .........
Mr. Grayson.................... ........ X .........
Mr. Himes...................... ........ X .........
Mr. Peters..................... ........ X .........
Mr. Maffei..................... ........ X .........
----------------------------------------------------------------------------------------------------------------
The following other amendments were also considered by the
Committee:
An amendment by Mr. Frank, no. 1, a manager's amendment,
was agreed to by a voice vote.
An amendment by Mr. Garrett (NJ), no. 2, changing the short
title, was not agreed to a voice vote.
An amendment by Ms. Kilroy, no. 3, requiring a Treasury
Department report, was agreed to by a voice vote.
An amendment by Mr. Gutierrez (and Messrs. Perlmutter and
Klein), no. 5, regarding temporary amortization authority, was
offered and withdrawn.
An amendment by Mr. Miller (NC), no. 6, regarding the
ineligibility of institutions on FDIC problem bank list, was
agreed to by a voice vote. An amendment by Mr. Hensarling, no.
6a, to the amendment regarding the definition of the problem
bank list, was not agreed to by a voice vote.
An amendment by Mr. Paulsen (and Messrs. Lance and
Neugebauer), no. 8, regarding proceeds to pay down public debt,
was agreed to by a voice vote.
An amendment by Mr. Miller (NC) (and Mrs. Maloney and Mr.
Baca), no. 10, regarding a residential construction loan
guarantee program, was offered and withdrawn.
An amendment by Mr. Marchant, no. 11, regarding capital
investment repayment period, was agreed to by a voice vote.
An amendment by Mr. Hinojosa (and Messrs. Childers, Hodes
and Wilson), no. 12, regarding consideration of rural areas,
was agreed to by a voice vote.
An amendment by Mr. Baca, no. 14, regarding consideration
of financial education, was agreed to by a voice vote.
An amendment by Mr. Hensarling, no. 15, a prohibition on
participation by non-paying CPP recipients, was agreed to by a
voice vote.
An amendment by Mr. Carson (and Mr. Baca), no. 16,
regarding minority outreach, was agreed to by a voice vote.
An amendment by Mr. Cleaver, no. 18, regarding Community
Development Financial Institutions, was offered and withdrawn.
An amendment by Mr. Paulsen, no. 19, a deferral of tax on
income reinvested, was offered and withdrawn.
An amendment by Mr. Frank, no. 20, accelerating the
effective date for penalty rates, was agreed to by a voice
vote.
An amendment by Mr. Hensarling, no. 21, regarding minimum
underwriting standards, was agreed to by a voice vote.
An amendment by Mr. Sherman, no. 22, regarding the term
``other financial instruments'', was offered and withdrawn.
An amendment by Mr. Frank, no. 24, regarding the list of
recipient institutions, was agreed to by a voice vote.
An amendment by Mr. Hensarling, no. 25, regarding
notification of customers, was not agreed to by a voice vote.
An amendment by Mr. Hensarling no. 26, corresponding
reduction of authorization to purchase amount under TARP, was
ruled out of order as not germane.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 5297 establishes the Small Business Lending Fund which
is intended to boost small business lending by providing
additional capital to depository institutions with assets of
$10 billion or less. H.R. 5297 also creates the State Small
Business Credit Initiative, which will allocate funding to
states to support Capital Access Programs and a range of other
credit support programs.
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATE
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 25, 2010.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 5297, the Small
Business Lending Fund Act of 2010.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Avi Lerner.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure.
H.R. 5297--Small Business Lending Fund Act of 2010
Summary: H.R. 5297 would create the Small Business Lending
Fund (SBLF) and authorize the appropriation of funds to the
Treasury Department to make up to $30 billion of capital
investments in financial institutions with total assets of less
than or equal to $10 billion. Participating institutions would
issue to the Treasury preferred stock or similar instruments
with a dividend that would depend on the extent to which an
institution increases lending to small businesses.
Under the bill, as approved by the Committee on Financial
Services, the preferred stock would have to be redeemed within
10 years. Thus, the initial investments would be considered
loans for federal budgetary purposes. In addition,
consultations with federal regulators indicate that, for the
committee-approved language, investments made through the SBLF
would not be considered Tier 1 capital for the borrowing
institutions, and hence would not satisfy certain regulatory
capital requirements.
H.R. 5297 also would create a Small Business Credit
Initiative and authorize the appropriation of $2 billion to
assist states with their efforts to increase the amount of
capital made available by private lenders to small businesses.
CBO estimates that implementing H.R. 5297 would cost about
$3.3 billion over the 2011-2015 period, assuming appropriation
of the necessary amounts. We estimate that enacting the bill
would not affect direct spending or revenues; therefore, pay-
as-you-go procedures would not apply.
H.R. 5297 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 5297 is shown in the following table.
The costs of this legislation fall within budget function 370
(commerce and housing credit).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
------------------------------------------------------------
2011 2012 2013 2014 2015 2011-2015
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Small Business Lending Fund:
Estimated Authorization Level.................. 1,366 0 0 0 0 1,366
Estimated Outlays.............................. 1,366 0 0 0 0 1,366
Small Business Credit Initiative:
Authorization Level............................ 2,000 0 0 0 0 2,000
Estimated Outlays.............................. 335 335 495 655 75 1,895
Studies and Reports:
Estimated Authorization Level.................. 1 1 1 1 1 5
Estimated Outlays.............................. 1 1 1 1 1 5
Total Changes:
Estimated Authorization Level.............. 3,367 1 1 1 1 3,371
Estimated Outlays.......................... 1,702 336 496 656 76 3,266
----------------------------------------------------------------------------------------------------------------
Basis of estimate: For the purposes of this estimate, CBO
assumes that H.R. 5297 will be enacted by the end of fiscal
year 2010 and that the amounts necessary to implement the bill
will be appropriated for fiscal year 2011 (and subsequent years
in the case of the required studies and reports).
Small Business Lending Fund
H.R. 5297 would authorize the Treasury to purchase
preferred stock and similar instruments in financial
institutions, with dividend payments initially set at 5
percent. For the first four and one-half years from the date of
disbursement, the dividend payable to the Treasury would be
adjusted downward from 5 percent per annum to a rate that
depends on the extent to which an institution increases lending
to small businesses; for example, institutions that increase
such lending by 10 percent or more would pay a dividend of just
1 percent per annum. However, institutions that do not increase
their small business lending within the first two years would
owe a 7 percent annual dividend after that time. At the end of
that initial four-and-a-half-year term, the annual dividend
rate for all borrowers would be fixed at 9 percent.
Under the legislation, CBO expects that the Treasury would
disburse about $23 billion of the $30 billion of available
funds in fiscal year 2011, but would not disburse the remaining
$7 billion. Because the legislation specifies that the funds
must be repaid within 10 years, the investments would not be
classified as Tier 1 capital. From regulators' perspectives,
Tier 1 capital is the core measure of a bank's financial
strength; such capital consists primarily of common stock and
retained earnings, but may also include preferred stocks. If
the securities could qualify as Tier 1 capital, the demand for
the funds would probably be higher. Still, the SBLF would
provide relatively inexpensive financing for the eligible
institutions, especially those that currently provide only
moderate amounts of small business loans and could more easily
reach thresholds for growth in lending and thereby achieve
lower dividend rates.
CBO expects that early repayments would be small in the
first few years, but become significant at the end of the four-
and-a-half-year term when the dividend would reset to the
higher rate. In particular, the increase in dividends to 9
percent would probably spur most borrowers to repay the loans
much earlier than the 10-year limit on outstanding funds.
Credit Reform Budget Treatment. The budgetary accounting
for loans from the SBLF is governed by the Federal Credit
Reform Act of 1990 (FCRA), which requires an appropriation of
the subsidy and administrative costs associated with federal
loan guarantees and federal direct loans. Although the purchase
of preferred stock requiring a dividend payment differs from a
traditional loan requiring an interest payment, CBO believes
the capital investments from the SBLF under this bill would
meet the definition of a loan under FCRA because of the bill's
specific requirement that those investments be repaid to the
federal government within 10 years.
Under FCRA, the subsidy is the estimated lifetime cost to
the government of a loan or loan guarantee, calculated on a
net-present-value basis excluding administrative costs. FCRA
further specifies that the present-value computation should be
done by discounting the expected net cash flows from the
government at interest rates on Treasury securities of
comparable maturity. On that basis, CBO estimates that the
subsidy cost for the SBLF would total $1.4 billion over the
2010-2015 period (6 percent of the roughly $23 billion in
expected loans), resulting from a projected level of defaults
and missed dividend payments.
Fair-Value Evaluation. Alternatively, the potential costs
of the SBLF under H.R. 5297 can be measured using procedures
similar to those specified by FCRA but adjusted for market
risk--as is specified by law for estimating the costs of the
Troubled Asset Relief Program.
Cost estimates made under FCRA do not provide a
comprehensive measure of the cost to taxpayers primarily
because the FCRA methodology does not include the costs that
stem from certain risks involved in lending--risks that private
investors would require compensation to bear. In particular,
although the FCRA methodology accounts for average losses from
defaults, it does not recognize a cost for the risk that losses
from defaults will be higher during periods of market stress,
when resources are scarce and hence most valuable. Such
``market risk'' is excluded from FCRA estimates because that
methodology discounts expected cash flows at Treasury borrowing
rates rather than at higher interest rates that incorporate the
price of risk.
Estimates prepared on a ``fair-value'' basis include the
cost of the risk that the government has assumed; as a result,
they provide a more comprehensive measure of the cost of the
financial commitments than estimates done on a FCRA basis or on
a cash basis. CBO estimates that if the budgetary impact of the
SBLF under H.R. 5297 was calculated on such a fair-value basis
(that is, reflecting market risk), the cost would be
approximately $3.4 billion (15 percent of the roughly $23
billion in expected loans).
Small Business Credit Initiative
H.R. 5297 would also authorize the appropriation of $2
billion to be allocated to states (or in some cases,
municipalities) that have created programs to increase the
amount of capital made available by private lenders to small
businesses. The federal funds would be allocated among the
states based on certain employment statistics; states would
have nine months from the date of enactment of the bill to
apply to participate in the program. The Department of the
Treasury would release funds to participating states in three
installments. The first installment would be released upon
approval of a state's application, and the second and third
installments would be released after the Department of the
Treasury completes an audit of the state's spending of the
previous installment. Assuming appropriation of the specified
amount, CBO estimates that implementing this program would cost
$1.9 billion over the 2010-2015 period.
H.R. 5297 also would require the Department of the Treasury
and the Government Accountability Office to prepare certain
reports and to audit both the Small Business Lending Fund
program and the Small. Business Credit Initiative on a regular
basis. Assuming appropriation of the necessary amounts, CBO
estimates that implementing the bill's reporting and auditing
requirements would cost $5 million over the 2010-2015 period.
Pay-As-You-Go considerations: None.
Intergovernmental and private-sector impact: H.R. 5297
contains no intergovernmental or private-sector mandates as
defined in UMRA. The bill would benefit state and local
governments by providing funding for lending to small
businesses. Any costs to those entities participating in the
program would be incurred voluntarily.
Estimate prepared by: Federal costs: Avi Lerner, Wendy
Kiska, and Joe Mattey (Small Business Lending Fund) and Susan
Willie (Small Business Credit Initiative); Impact on state,
local, and tribal governments: Elizabeth Cove Delisle; Impact
on the private sector: Sam Wice.
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis; Deborah Lucas, Assistant Director
for Financial Analysis.
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
CONSTITUTIONAL AUTHORITY STATEMENT
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
EARMARK IDENTIFICATION
H.R. 5297 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
TITLE I--SMALL BUSINESS LENDING FUND
Section 1. Short title
Designates Title I as the ``Small Business Lending Fund Act
of 2010.''
Section 2. Purpose
Describes the purpose of Title I as addressing the ongoing
effects of the financial crisis on small businesses by
providing temporary authority to the Secretary of the Treasury
to make capital investments in eligible institutions in order
to increase the availability of credit for small businesses.
Section 3. Definitions
This section defines terms used in Title I, including
eligible institutions. Eligible institutions are insured
depository institutions with total assets of $10 billion or
less (as of the end of 2009) and their parent bank holding
companies and saving & loan holding companies.
Section 4. Small Business Lending Fund
Establishment of Fund and Authorization to Invest. This
section establishes the Small Business Lending Fund (SBLF) and
authorizes the Secretary of Treasury to invest $30 billion in
preferred stock or other financial instruments from eligible
institutions.
Applications. Applications to receive investments from the
fund must include a small business lending plan describing how
the applicant's business strategy and operating goals will
allow it to address the needs of small businesses in the areas
it serves. An eligible institution with $1 billion or less in
total assets may apply to receive an amount up to 5 percent of
its risk-weighted assets. An eligible institution with $10
billion or less in total assets, but more than $1 billion in
total assets may apply to receive an amount up to 3 percent of
its risk-weighted assets. The Secretary may not deny an
application solely on the basis of the institution's CAMELS
rating.
Incentives to Lend. The SBLF will have built-in incentives
for participants to increase small business lending by reducing
the dividend or interest rate on the investment the more the
participant increases its small business lending as compared to
the baseline year-end 2009 level of small business lending, as
low as 1 percent. If small business lending has increased by
less than 2.5 percent, the dividend or interest rate shall
remain 5 percent; if small business lending has increased by
2.5 percent or greater, but by less than 5.0 percent, the
dividend or interest rate shall be 4 percent if small business
lending has increased by 5.0 percent, but by less than 7.5
percent, the dividend or interest rate shall be 3 percent; if
small business lending has increased by 7.5 percent or greater,
and but by less than 10.0 percent, the dividend or interest
rate shall be 2 percent; or if small business lending has
increased by 10 percent or greater, the dividend or interest
rate shall be 1 percent. There will be a penalty rate of 7
percent for institutions that do not increase their small
business lending by at least 2.5 percent, and a 9 percent rate
for institutions that do not pay back the investment within
4\1/2\ years.
Other Capital Investment Programs. This section also
requires that the Secretary of Treasury issue regulations and
other guidance to permit eligible institutions to refinance
securities issued to Treasury under the TARP Capital Purpose
Program and the Community Development Capital Investment for
securities to be issued under the SBLF.
Minority Outreach. This provision requires that recipients
of SBLF funds provide outreach and advertising to minority
communities about the availability of small business loans. The
outreach and advertising must be through various print and
electronic media in the appropriate language of the applicant
pool.
Minimum Underwriting Standards. This provision requires the
appropriate federal banking agencies to issue regulations
within 60 days of enactment defining minimum underwriting
standards for loans made using SBLF funds.
Section 5. Additional authorities of the Secretary
This section provides additional authorities of the
Secretary to manage the program, including authorization to
issue regulations in consultation with the Administrator of the
Small Business Administration.
Section 6. Considerations
This section directs the Secretary to take into
consideration (1) increasing the availability of credit for
small businesses; (2) providing funding to eligible
institutions that serve small businesses in low- and moderate-
income, minority and other underserved communities; (3)
protecting and increasing American jobs; (4) ensuring that all
eligible institutions may apply to participate in the program
established under this Title, without discrimination based on
geography; (5) providing transparency with respect to use of
funds provided under this Title; (6) minimizing the cost to
taxpayers of exercising the authorities; and (7) promoting and
engaging in financial education to would-be borrowers.
Section 7. Reports
This section requires the Secretary to file monthly reports
to appropriate Congressional committees regarding transactions
entered into and how SBLF participants are using such funds as
well as semiannual reports regarding operating expenses,
liabilities, and how much funding each participant has
received.
Section 8. Oversight and audits
This section provides for an annual GAO audit of the SBLF
and oversight through the Treasury Department Inspector
General.
Section 9. Credit reform; Funding
This section authorizes appropriation of such sums as shall
be necessary to pay the costs of $30 billion in capital
investments to eligible institutions through the SBLF, and
clarifies that cost of capital investments under the SBLF will
be determined as provided under the Federal Credit Reform Act
of 1990 (2 U.S.C. 661 et seq.).
Section 10. Termination and continuation of authorities
This section terminates the authority to make capital
investments in eligible institutions one year after the date of
enactment, but continues the authorities of the Secretary in
section 5 to manage the SBLF.
Section 11. Preservation of authority
Nothing in this Title may be construed to limit the
authority of the Secretary under any other provision of law.
Section 12. Assurances
This section clarifies that the SBLF is not part of the
Troubled Asset Relief Program, and provides that participants
may repay the investment without impediment in the event that a
change in law modifies the terms of the SBLF in a materially
adverse respect.
Section 13. Study and report with respect to women-owned and minority-
owned businesses
This section requires the Secretary of Treasury to conduct
a study regarding the number of women- and minority-owned
businesses that receive assistance as a result of the SBLF, and
report such finding to the Congress no later than one year
after the date of enactment.
TITLE II--STATE SMALL BUSINESS CREDIT INITIATIVE
Section 201. Short title
Designates Title II as the ``State Small Business Credit
Initiative Act of 2010''
Section 202. Definitions
Includes a number of definitions for Title II.
Section 203. Federal funds allocated to states
Establishes the State Small Business Credit Initiative.
Funding is allocated to states using an average of the formula
used in the Recovery Zone Bond program in the American Recovery
and Reinvestment Act (ARRA) and the more recent Recovery Zone
Bond formula used in the House-passed Small Business and
Infrastructure Jobs Tax Act of 2010. The ARRA formula takes
into account a state's job losses in 2008 in proportion to the
aggregate job losses of all states in 2008, and the Small
Business and Infrastructure Jobs Tax Act formula uses the same
comparison using 2009 numbers. Each state is guaranteed a
minimum allocation of 0.9 percent.
Treasury is directed to disburse the funds in one-third
increments. The first third is released to the state after
approval of their plan. The remaining one-third allocations are
released when the state has utilized or obligated 80 percent of
the previous allocation, and the Treasury Department Inspector
General has audited the use of such funds. Treasury can
withhold any allocation pending the results of an audit. A
state can seek approval to receive its entire allocation at one
time, at the discretion of the Secretary.
States can only use federal funds for an approved state
lending program, as collateral for a qualifying loan or swap
lending facility, and to pay administrative costs.
Administrative costs are capped at 5 percent for the first
third and 3 percent for the remaining funds.
Any state allocation not transferred to the state within
two years goes back to the General Fund.
Sec. 204. Approving states for participation
In order to receive approval from Treasury to participate,
a state must designate a department or agency to implement the
program; submit an application to Treasury, and enter into an
agreement with Treasury that binds the state to comply with
national standards set forth in the title; have internal
control and compliance and reporting conditions, gives the
Secretary the power to audit the program; require the state
program to begin extending credit within 90 days; and require
the state to provide an annual update to Treasury detailing how
it allocates its federal funds amongst the state programs in
place.
The state can enter into a contract with another state or
with a private for-profit or non-profit to implement and
administer its program.
If a state does not file its intent to apply within 60 days
of enactment or file a complete application within 9 months of
enactment, Treasury can allow individual municipalities or
groups of municipalities jointly to apply. Municipalities must
apply within 12 months of enactment. If multiple municipalities
individually apply, the three largest will receive funding in
proportion to their population.
Section 205. Approving state capital access programs
State Capital Access Programs must provide portfolio
insurance for business loans based on a separate loan-loss
reserve fund for each financial institution supported by
premium insurance payments from lenders and borrowers to the
reserve fund for each loan. The state must also make a payment
to the reserve fund for each loan matching the premium
insurance payment made by the borrower and lender, and can use
its federal funds for this purpose. The borrower must have 500
employees or less and the loan cannot exceed five million
dollars.
The state must ensure that participating financial
institutions have the capacity to successfully participate in
the program. The state creates the reserve fund at each lending
institution by opening an account at that institution under the
states' name. Loan terms are set between the lender and
borrower. The lender must have a meaningful amount of its own
capital at risk. The premium insurance charges are set by the
financial institution, but must be between 2 percent and 7
percent of the loan amount. The state can make an additional
contribution to the loan fund using non-federal funds.
The borrower must agree to use the loan for a business
purpose and cannot be an officer, director, or principal
shareholder of the financial institution, or an immediate
family member of such a person. The financial institution can't
use the CAP loan fund to cover a prior debt or refinance an
existing loan.
Sec. 206. Approving collateral support and other innovative credit
access and guarantee initiatives for small businesses and
manufacturers
In order to have its program approved, a state must
establish that every dollar of federal investment will be
matched by at least one dollar of private funds in each program
funded. States must also show that, in total, their programs
will support at least ten dollars in private lending for every
one dollar in federal support. Participating lenders must share
in the risk of default with the government.
The credit support must target an average borrower size of
500 employees or less, and cannot extend credit support to
borrowers with more than 750 employees. The credit support must
target loans with an average principal amount of $5 million,
and cannot extend credit for loans with principal amounts of
over $20 million.
When determining whether to approve an application,
Treasury must also consider the anticipated benefit to the
state, the extent that increased lending will expand economic
opportunities, the operational capacity of the state to carry
out the program, the ability of the state program to manage
increased lending capacity, whether the administrative
accounting and internal controls of the program are sufficient
to safeguard against waste or fraud, and the soundness of the
program design and implementation plan.
Section 207. Reports
States must submit quarterly use of funds reports
indicating the total amount of funding used. States must submit
annual reports indicating the number of loans offered, the
amounts of loans, breakdowns of industry type, size, annual
sales, and number of employees, and the zip code of each
borrower receiving a loan.
Section 208. Remedies for state program termination or failures
Federal funding can be reduced or eliminated if a state
terminates its program, fails to submit required reports, or
violates the terms of the agreement entered into with Treasury.
De-allocated funds are reallocated to participating states.
Section 209. Implementation and administration
Treasury must coordinate with the Small Business
Administration (SBA) and bank regulators in the administration
of the program; establish minimum national standards, provide
technical assistance to states and disseminate best practices;
manage, administer, and perform program integrity functions;
and ensure adequate oversight.
$2 billion of funding is authorized to be appropriated.
Treasury can utilize expedited contracting procedures
during the first year after enactment to carry out the program.
Treasury's responsibility to administer the program expires
after seven years.
Treasury, in consultation with the SBA, shall issue
regulations necessary to carry out this title.
DISSENTING VIEWS
The following represents the views of the Republican
Members of the Committee on the following issues, consistent
with H.R. 5297, Small Business Lending Fund Act of 2010.
Because bank lending to small businesses remains
constrained, policymakers have looked for ways to facilitate
lending and for explanations why qualified borrowers are
struggling to get credit. Many believe that banks are holding
back because of regulatory pressure to reduce risks and
conserve capital; others wonder whether the problem is actually
a lack of demand for small business loans. Yet, whatever the
cause, there is consensus that unless commercial credit becomes
more broadly available, a sustainable economic recovery will
remain elusive.
Thus far, the Administration and the Majority in Congress
have experimented with a series of programs that have failed to
help small businesses or create jobs, and have succeeded only
in adding hundreds of billions of dollars to the national debt.
H.R. 5297, the ``Small Business Lending Fund Act,'' is unlikely
to be any more successful than these earlier failed
initiatives. The legislation opens the door to another
government infusion of taxpayer cash into the banking system.
By creating a new $32 billion bailout fund and modeling it on
the Troubled Asset Relief Program (TARP), the Majority has
decided that the mistakes of the past are worth repeating.
H.R. 5297 does not properly deal with the lack of financing
for small businesses. Instead of addressing the problem by
stimulating demand for credit by small businesses, H.R. 5297
injects capital into banks with no guarantees that they will
actually lend. The bill allows a qualifying bank to obtain a
capital infusion from the government without even requiring the
bank to make a loan for two years. In fact, if a bank reduces
or fails to increase lending to small business during those
first two years, it would not face any penalty. It defies logic
that the Majority would support a bill to increase lending that
does not actually require increased lending. A more effective
response to the challenges facing America's small businesses
was offered by Representatives Biggert, Paulsen, Castle,
Gerlach, and King, whose amendment would have extended a series
of small business tax credits before implementing the Small
Business Lending Fund. Their amendment was defeated on a party-
line vote.
Independent observers have also criticized the efficacy of
the Majority's approach. The TARP Congressional Oversight Panel
(``COP''), chaired by Elizabeth Warren, released a report on
May 13, 2010, expressing deep skepticism that the Small
Business Lending Fund established by H.R. 5297 could ever be
successful. The report said that even if the Small Business
Lending Fund were created by Congress immediately, the program
probably would not be fully operational for months; banks could
shun the program for fear of being stigmatized by its
association with the TARP; and many banks would avoid taking on
new liabilities when their existing assets are troubled.
Finally, H.R. 5297 does not even provide effective
oversight over the fund it creates. The Inspector General of
the Department of the Treasury would be given the
responsibility of oversight, but it might not be able to direct
sufficient attention to this task given its other
responsibilities. Representatives Hensarling and Lance offered
an amendment that would have provided oversight authority to
the Special Inspector General of TARP (SIGTARP), which has
invested time, personnel and infrastructure to develop the
expertise necessary to effectively monitor capital investment
programs. Unfortunately, the amendment was defeated on a party-
line vote.
During debate in Committee, the Majority denied Republican
claims that H.R. 5297 is nothing more than ``TARP Junior,'' the
enactment of which would have the effect of extending the TARP
beyond its scheduled October 3, 2010 expiration date. Yet no
less an authority than the SIGTARP, Neil Barofsky, has
emphatically rejected the Democrats' attempt to differentiate
their new bank bailout from the program he oversees. In a May
17, 2010 letter to Chairman Frank and Ranking Member Bachus,
Mr. Barofsky wrote that ``in terms of its basic design, its
participants, its application process, and, perhaps, its
funding source from an oversight perspective, the [Small
Business Lending Fund] would essentially be an extension of
TARP's [Capital Purchase Program].''
Because the solutions to America's economic problems do not
lie in more taxpayer-funded bailouts, Committee Republicans
were unanimous in our opposition to this misguided legislation.
Spencer Bachus.
Randy Neugebauer.
Donald A. Manzullo.
Mike Castle.
Judy Biggert.
Christopher Lee.
Scott Garrett.
Shelley Moore Capito.
Lynn Jenkins.