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[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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.

                                  
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