Economic Growth and Stabilization Financing Demonstration Act 1994

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Economic Growth and Stabilization 
Financing Demonstration Act 1994''.

SEC. 101. GUARANTEED LOAN DEMONSTRATION PROGRAM.

    (a) In General.--In order to study the feasibility and desirability 
of a program of loan guarantees for economic growth and stabilization 
in communities facing economic distress, the Secretary is authorized to 
guarantee loans made to private borrowers by private lending 
institutions, community development financial institutions, and other 
lenders as the Secretary considers appropriate, except that the 
Secretary may guarantee loans less than $750,000 only if the borrower 
is not eligible for a loan guarantee under the Small Business Act.
    (b) Terms and Conditions.--
            (1) In general.--The Secretary may make such guarantees 
        upon application of the lenders and upon such terms and 
        conditions as the Secretary may prescribe.
            (2) Presumption of validity.--Guarantees under paragraph 
        (1) shall be conclusive evidence that the guarantee has been 
        properly obtained, that the underlying loan qualifies for such 
        guarantee, and that, but for fraud or material 
        misrepresentation by the holder, such guarantee will be 
        presumed to be valid, legal, and enforceable.
            (3) Lender responsibility.--No guarantee will be provided 
        unless the lender is responsible and makes adequate provision 
        for servicing the loan on reasonable terms and for protecting 
        the financial interest of the United States.
    (c) Preferred Lender Preference.--To the extent feasible, the 
Secretary shall exercise the guarantee authority established under this 
section on a preferred lender basis and authorize lenders, in 
accordance with agreements entered into between the Secretary and such 
lenders, to take such actions on the Secretary's behalf as the 
Secretary deems appropriate, including, but not limited to, the 
determination of eligibility and credit worthiness and loan monitoring, 
collection and liquidation.
    (d) Target Subsidy Rate.--In exercising the loan guarantee 
authority provided under this section, the Secretary shall attempt to 
administer the program in a manner which results in a subsidy rate not 
to exceed approximately 6 percent of the amount of the overall loan 
guarantees.
    (e) Authorization of Appropriations.--Of the funds authorized to be 
appropriated under section 106, for purposes of this section there are 
authorized to be appropriated $50,000,000 per fiscal year to cover the 
costs (as defined in section 502(5) of the Federal Credit Reform Act of 
1990 (2 U.S.C. 661a(5))) of loan guarantees issued pursuant to 
subsection (b)(3) of such section. Such sums shall remain available 
until expended.

SEC. 102. INTEREST RATE SUBSIDY DEMONSTRATION PROGRAM.

    (a) In General.--In order to study the feasibility and desirability 
of a program of interest rate subsidies for economic growth and 
stabilization in communities facing economic distress, the Secretary is 
authorized to pay interest rate subsidies to private lending 
institutions, community development financial institutions, and other 
lenders as the Secretary considers appropriate, for loans made to 
private borrowers.
    (b) Terms and Conditions.--The Secretary may pay interest rate 
subsidies upon application of the lenders and upon such terms and 
conditions as the Secretary may prescribe, except that no interest rate 
subsidy may be provided unless the lender is responsible and makes 
adequate provision for servicing the loan on reasonable terms and for 
protecting the financial interest of the United States.
    (c) Preferred Lender Preference.--To the extent feasible, the 
Secretary shall exercise the interest rate subsidy authority 
established under this section on a preferred lender basis and 
authorize lenders, in accordance with agreements entered into between 
the Secretary and such lenders, to take such actions on the Secretary's 
behalf as the Secretary deems appropriate, including, but not limited 
to, the determination of eligibility and credit worthiness and loan 
monitoring, collection and liquidation.

SEC. 103. EQUITY FINANCE DEMONSTRATION PROGRAM.

    (a) In General.--In order to study the feasibility and desirability 
of a program of equity financing for economic growth and stabilization 
in communities facing economic distress, the Secretary is authorized to 
establish a demonstration program under which the Secretary may 
directly, or indirectly through grants to eligible intermediaries, 
purchase or commit to purchase warrants, subordinated debt, or 
nonvoting preferred securities of private United States businesses or 
nonprofit organizations and associations.
    (b) Establishment of Fund.--For purposes of conducting the program 
provided under subsection (a), the Secretary shall establish an Equity 
Investment Revolving Fund.
    (c) Disposal of Equity Instruments.--The Secretary shall endeavor 
to dispose of any financial instruments purchased or guaranteed under 
this section within a period of 10 years after their date acquisition 
of such interest.
    (d) Use of Payments.--
            (1) Use of payments to the secretary.--Amounts received by 
        the Secretary from the payment of dividends and the redemption 
        of financial instruments acquired under this section shall be 
        deposited in the Equity Investment Revolving Fund and shall, 
        subject to appropriations, be available to make or guarantee 
        additional investments consistent with this section.
            (2) Use of payments to eligible intermediaries.--Of the 
        amounts received by eligible recipient intermediaries from the 
        payment of dividends and the redemption of financial 
        instruments acquired under this section--
                    (A) up to 50 percent may be retained by such 
                eligible intermediaries to make or guarantee additional 
                investments consistent with this section, and
                    (B) no less than 50 percent shall be returned to 
                the Secretary to be deposited into the Fund established 
                under subsection (b) to make or guarantee additional 
                investments consistent with this section.
    (e) Investment of Excess Funds.--If the Secretary determines that 
the amount of money in the Fund exceeds the current requirements of the 
Fund, the Secretary may direct the Secretary of the Treasury to invest 
such amounts in obligations of the United States, in obligations 
guaranteed by the United States Government, or in such other 
obligations or securities of the United States as the Secretary of the 
Treasury deems appropriate. Provided, however, that any subsequent use 
of monies so invested shall be subject to appropriations.

SEC. 104. SECONDARY MARKET CREDIT ENHANCEMENT DEMONSTRATION PROGRAM.

    In order to study the feasibility and desirability of a program of 
providing credit enhancements to pools of financial instruments related 
to economic growth and stabilization activities in communities facing 
economic distress, the Secretary is authorized to establish a 
demonstration program under which the Secretary may provide credit 
enhancements to pools of financial instruments related to economic 
growth and stabilization activities in such areas.

SEC. 105. PERFORMANCE EVALUATIONS; REPORT TO CONGRESS.

    (a) Performance Evaluations.--The Secretary shall conduct 
performance evaluations of each of the demonstration projects 
established under this Act to assess their effectiveness in promoting 
economic growth and stabilization in communities facing economic 
distress.
    (b) Annual Report.--Based on the evaluations conducted under 
subsection (a), the Secretary shall prepare and submit annually a 
report to the Congress containing a full and detailed account of 
operations under this Act. Such a report shall include--
            (1) performance measures established under subsection (a);
            (2) an audit setting forth the amount, type, recipient, and 
        source of disbursements, receipts, and losses sustained as a 
        result of operations under this Act during the preceding fiscal 
        year and since inception of the demonstration programs; and
            (3) recommendations with respect to program changes, 
        statutory changes, and other matters to improve and facilitate 
        the operations of the demonstration programs and to encourage 
        the use of these programs by qualified concerns.

SEC. 106. AUTHORIZATION OF APPROPRIATIONS.

    For purposes of this Act, there are authorized to be appropriated 
$90,000,000 per fiscal year. Such sums shall remain available until 
expended.

SEC. 107. SEPARABILITY.

    If any provision of this Act, or any application of such provision 
to any person or circumstance, shall be held invalid, the remainder of 
this Act, or the application of such provision to person or 
circumstance other than those as to which it is held invalid, shall not 
be affected thereby.

Summary: Economic Growth and Stabilization Financing Demonstration Act 1994 - Prescribes guidelines under which the Secretary of Commerce may conduct demonstration programs in economically distressed communities to: (1) guarantee loans made by lending institutions to private parties, (2) pay interest rate subsidies, (3) implement an equity financing program. And (4) provide secondary market credit enhancements to pools of financial instruments related to economic growth and stabilization in such communities. Directs the Secretary to conduct performance evaluations and submit an annual status report to the Congress. Authorizes appropriations.