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103D CONGRESS

2D SESSION H. R. 4766

To enhance the availability of credit to businesses in order to foster economic

growth and stabilization and to create new employment opportunities

in communities facing economic distress, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JULY 14, 1994

Mr. KANJORSKI (for himself, Mr. RIDGE, Mr. TRAFICANT, and Mr. HINCHEY)

introduced the following bill; which was referred to the Committee on

Banking, Finance and Urban Affairs

A BILL

To enhance the availability of credit to businesses in order

to foster economic growth and stabilization and to create

new employment opportunities in communities facing economic distress, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Economic Growth and

5 Stabilization Financing Demonstration Act 1994’’.

6 SEC. 101. GUARANTEED LOAN DEMONSTRATION PROGRAM.

7 (a) IN GENERAL.—In order to study the feasibility

8 and desirability of a program of loan guarantees for eco-
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1 nomic growth and stabilization in communities facing eco2 nomic distress, the Secretary is authorized to guarantee

3 loans made to private borrowers by private lending institu4 tions, community development financial institutions, and

5 other lenders as the Secretary considers appropriate, ex6 cept that the Secretary may guarantee loans less than

7 $750,000 only if the borrower is not eligible for a loan

8 guarantee under the Small Business Act.

9 (b) TERMS AND CONDITIONS.—

10 (1) IN GENERAL.—The Secretary may make

11 such guarantees upon application of the lenders and

12 upon such terms and conditions as the Secretary

13 may prescribe.

14 (2) PRESUMPTION OF VALIDITY.—Guarantees

15 under paragraph (1) shall be conclusive evidence

16 that the guarantee has been properly obtained, that

17 the underlying loan qualifies for such guarantee, and

18 that, but for fraud or material misrepresentation by

19 the holder, such guarantee will be presumed to be

20 valid, legal, and enforceable.

21 (3) LENDER RESPONSIBILITY.—No guarantee

22 will be provided unless the lender is responsible and

23 makes adequate provision for servicing the loan on

24 reasonable terms and for protecting the financial in25 terest of the United States.
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1 (c) PREFERRED LENDER PREFERENCE.—To the ex2 tent feasible, the Secretary shall exercise the guarantee

3 authority established under this section on a preferred

4 lender basis and authorize lenders, in accordance with

5 agreements entered into between the Secretary and such

6 lenders, to take such actions on the Secretary’s behalf as

7 the Secretary deems appropriate, including, but not lim8 ited to, the determination of eligibility and credit worthi9 ness and loan monitoring, collection and liquidation.

10 (d) TARGET SUBSIDY RATE.—In exercising the loan

11 guarantee authority provided under this section, the Sec12 retary shall attempt to administer the program in a man13 ner which results in a subsidy rate not to exceed approxi14 mately 6 percent of the amount of the overall loan guaran15 tees.

16 (e) AUTHORIZATION OF APPROPRIATIONS.—Of the

17 funds authorized to be appropriated under section 106,

18 for purposes of this section there are authorized to be ap19 propriated $50,000,000 per fiscal year to cover the costs

20 (as defined in section 502(5) of the Federal Credit Reform

21 Act of 1990 (2 U.S.C. 661a(5))) of loan guarantees issued

22 pursuant to subsection (b)(3) of such section. Such sums

23 shall remain available until expended.
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1 SEC. 102. INTEREST RATE SUBSIDY DEMONSTRATION PRO2 GRAM.

3 (a) IN GENERAL.—In order to study the feasibility

4 and desirability of a program of interest rate subsidies for

5 economic growth and stabilization in communities facing

6 economic distress, the Secretary is authorized to pay inter7 est rate subsidies to private lending institutions, commu8 nity development financial institutions, and other lenders

9 as the Secretary considers appropriate, for loans made to

10 private borrowers.

11 (b) TERMS AND CONDITIONS.—The Secretary may

12 pay interest rate subsidies upon application of the lenders

13 and upon such terms and conditions as the Secretary may

14 prescribe, except that no interest rate subsidy may be pro15 vided unless the lender is responsible and makes adequate

16 provision for servicing the loan on reasonable terms and

17 for protecting the financial interest of the United States.

18 (c) PREFERRED LENDER PREFERENCE.—To the ex19 tent feasible, the Secretary shall exercise the interest rate

20 subsidy authority established under this section on a pre21 ferred lender basis and authorize lenders, in accordance

22 with agreements entered into between the Secretary and

23 such lenders, to take such actions on the Secretary’s be24 half as the Secretary deems appropriate, including, but

25 not limited to, the determination of eligibility and credit

26 worthiness and loan monitoring, collection and liquidation.
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1 SEC. 103. EQUITY FINANCE DEMONSTRATION PROGRAM.

2 (a) IN GENERAL.—In order to study the feasibility

3 and desirability of a program of equity financing for eco4 nomic growth and stabilization in communities facing eco5 nomic distress, the Secretary is authorized to establish a

6 demonstration program under which the Secretary may di7 rectly, or indirectly through grants to eligible

8 intermediaries, purchase or commit to purchase warrants,

9 subordinated debt, or nonvoting preferred securities of pri10 vate United States businesses or nonprofit organizations

11 and associations.

12 (b) ESTABLISHMENT OF FUND.—For purposes of

13 conducting the program provided under subsection (a), the

14 Secretary shall establish an Equity Investment Revolving

15 Fund.

16 (c) DISPOSAL OF EQUITY INSTRUMENTS.—The Sec17 retary shall endeavor to dispose of any financial instru18 ments purchased or guaranteed under this section within

19 a period of 10 years after their date acquisition of such

20 interest.

21 (d) USE OF PAYMENTS.—

22 (1) USE OF PAYMENTS TO THE SECRETARY.—

23 Amounts received by the Secretary from the pay24 ment of dividends and the redemption of financial

25 instruments acquired under this section shall be de26 posited in the Equity Investment Revolving Fund
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1 and shall, subject to appropriations, be available to

2 make or guarantee additional investments consistent

3 with this section.

4 (2) USE OF PAYMENTS TO ELIGIBLE

5 INTERMEDIARIES.—Of the amounts received by eligi6 ble recipient intermediaries from the payment of

7 dividends and the redemption of financial instru8 ments acquired under this section—

9 (A) up to 50 percent may be retained by

10 such eligible intermediaries to make or guaran11 tee additional investments consistent with this

12 section, and

13 (B) no less than 50 percent shall be re14 turned to the Secretary to be deposited into the

15 Fund established under subsection (b) to make

16 or guarantee additional investments consistent

17 with this section.

18 (e) INVESTMENT OF EXCESS FUNDS.—If the Sec19 retary determines that the amount of money in the Fund

20 exceeds the current requirements of the Fund, the Sec21 retary may direct the Secretary of the Treasury to invest

22 such amounts in obligations of the United States, in obli23 gations guaranteed by the United States Government, or

24 in such other obligations or securities of the United States

25 as the Secretary of the Treasury deems appropriate. Pro-
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1 vided, however, that any subsequent use of monies so in2 vested shall be subject to appropriations.

3 SEC. 104. SECONDARY MARKET CREDIT ENHANCEMENT

4 DEMONSTRATION PROGRAM.

5 In order to study the feasibility and desirability of

6 a program of providing credit enhancements to pools of

7 financial instruments related to economic growth and sta8 bilization activities in communities facing economic dis9 tress, the Secretary is authorized to establish a dem10 onstration program under which the Secretary may pro11 vide credit enhancements to pools of financial instruments

12 related to economic growth and stabilization activities in

13 such areas.

14 SEC. 105. PERFORMANCE EVALUATIONS; REPORT TO CON15 GRESS.

16 (a) PERFORMANCE EVALUATIONS.—The Secretary

17 shall conduct performance evaluations of each of the dem18 onstration projects established under this Act to assess

19 their effectiveness in promoting economic growth and sta20 bilization in communities facing economic distress.

21 (b) ANNUAL REPORT.—Based on the evaluations

22 conducted under subsection (a), the Secretary shall pre23 pare and submit annually a report to the Congress con24 taining a full and detailed account of operations under this

25 Act. Such a report shall include—
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1 (1) performance measures established under

2 subsection (a);

3 (2) an audit setting forth the amount, type, re4 cipient, and source of disbursements, receipts, and

5 losses sustained as a result of operations under this

6 Act during the preceding fiscal year and since incep7 tion of the demonstration programs; and

8 (3) recommendations with respect to program

9 changes, statutory changes, and other matters to im10 prove and facilitate the operations of the demonstra11 tion programs and to encourage the use of these

12 programs by qualified concerns.

13 SEC. 106. AUTHORIZATION OF APPROPRIATIONS.

14 For purposes of this Act, there are authorized to be

15 appropriated $90,000,000 per fiscal year. Such sums shall

16 remain available until expended.

17 SEC. 107. SEPARABILITY.

18 If any provision of this Act, or any application of such

19 provision to any person or circumstance, shall be held in20 valid, the remainder of this Act, or the application of such

21 provision to person or circumstance other than those as

22 to which it is held invalid, shall not be affected thereby.

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