Union Calendar No. 71

104TH CONGRESS

1ST SESSION H. R. 1720

[Report No. 104–153]

A BILL

To amend the Higher Education Act of 1965 to

for other purposes.of two Government sponsored enterprises, andprovide for the cessation of Federal sponsorship

JUNE 22, 1995

Reported with an amendment, committed to the Commitordered to be printed tee of the Whole House on the State of the Union, and
IB

Union Calendar No. 71

104TH CONGRESS

1ST SESSION H. R. 1720

[Report No. 104–153]

To amend the Higher Education Act of 1965 to provide for the cessation

of Federal sponsorship of two Government sponsored enterprises, and

for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 25, 1995

Mr. MCKEON introduced the following bill; which was referred to the

Committee on Economic and Educational Opportunities

JUNE 22, 1995

Reported with an amendment, committed to the Committee of the Whole

House on the State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in italic]

[For text of introduced bill, see copy of bill as introduced on May 25, 1995]

A BILL

To amend the Higher Education Act of 1965 to provide

for the cessation of Federal sponsorship of two Government sponsored enterprises, 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,
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1 SECTION 1. SHORT TITLE; REFERENCES.

2 (a) SHORT TITLE.—This Act may be cited as the

3 ‘‘Privatization Act of 1995’’.

4 (b) REFERENCES.—References in this Act to ‘‘the Act’’

5 are references to the Higher Education Act of 1965.

6 SEC. 2. PURPOSE.

7 The purpose of this Act is to provide for the cessation

8 of Federal sponsorship of two Government sponsored enter9 prises, the Student Loan Marketing Association and the

10 College Construction Loan Insurance Association now that

11 both corporations are economically viable and have success12 fully fulfilled the purposes for which they were created.

13 TITLE I—STUDENT LOAN

14 MARKETING ASSOCIATION

15 SEC. 101. REORGANIZATION OF THE STUDENT LOAN MAR16 KETING ASSOCIATION THROUGH THE FORMA17 TION OF A HOLDING COMPANY.

18 (a) AMENDMENT.—Part B of title IV of the Act (20

19 U.S.C. 1071 et seq.) is amended by inserting after section

20 439 (20 U.S.C. 1087–2) the following new section:

21 ‘‘SEC. 440. REORGANIZATION OF THE STUDENT LOAN MAR22 KETING ASSOCIATION THROUGH THE FORMA23 TION OF A HOLDING COMPANY.

24 ‘‘(a) ACTIONS BY THE ASSOCIATION’S BOARD OF DI25 RECTORS.—The Board of Directors of the Association shall

26 take or cause to be taken all such action as it deems nec-
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1 essary or appropriate to effect, upon the shareholder ap2 proval described in subsection (b), a restructuring of the

3 common stock ownership of the Association, as set forth in

4 a plan of reorganization adopted by the Board of Directors

5 (the terms of which shall be consistent with this Act) so that

6 all of the outstanding common shares shall be directly

7 owned by an ordinary business corporation chartered under

8 State or District of Columbia law (the ‘Holding Company’),

9 as the Board of Directors may determine. Such actions may

10 include, in the Board’s discretion, a merger of a wholly

11 owned subsidiary of the Holding Company with and into

12 the Association, which would have the effect provided in the

13 plan of reorganization and the law of the jurisdiction in

14 which such subsidiary is incorporated. As part of the re15 structuring, the Board of Directors may cause (1) the com16 mon shares of the Association to be converted, at the reorga17 nization effective date, to common shares of the Holding

18 Company on a one for one basis, consistent with applicable

19 State or District of Columbia law, and (2) Holding Com20 pany common shares to be registered with the Securities

21 and Exchange Commission.

22 ‘‘(b) SHAREHOLDER APPROVAL.—The plan of reorga23 nization adopted by the Board of Directors pursuant to sub24 section (a) shall be submitted to common stockholders of the

25 Association for their approval. The reorganization shall
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1 occur at the reorganization effective date, provided that the

2 plan of reorganization has been approved by the affirmative

3 votes, cast in person or by proxy, of the holders of a major4 ity of the issued and outstanding shares of the Association

5 common stock.

6 ‘‘(c) TRANSITION.—

7 ‘‘(1) IN GENERAL.—Except as specifically pro8 vided in this section, until the dissolution date the As9 sociation shall continue to have all of the rights,

10 privileges and obligations set forth in, and shall be

11 subject to all of the limitations and restrictions of,

12 section 439 of this Act as in effect on the effective date

13 of this section, and the Association shall continue to

14 carry out the purposes of such section. The Holding

15 Company and its affiliates other than the Association

16 shall not be entitled to any of the rights, privileges

17 and obligations, and shall not be subject to the limita18 tions and restrictions, applicable to the Association

19 under section 439 of this Act as in effect on the effec20 tive date of this section, except as specifically pro21 vided in this section. The Holding Company and its

22 subsidiaries (other than the Association) shall not

23 purchase loans insured under this Act until such time

24 as the Association ceases acquiring such loans, except

25 that the Association shall continue to acquire loans as
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1 a lender of last resort pursuant to section 439(q) of

2 this Act or under an agreement with the Secretary de3 scribed in section 440(c)(6).

4 ‘‘(2) TRANSFER OF CERTAIN PROPERTY.—Except

5 as specifically provided in this section, at the reorga6 nization effective date or as soon as practicable there7 after, the Association shall use its best efforts to trans8 fer to the Holding Company or its subsidiaries (or

9 both), in each case, as directed by the Holding Com10 pany, all real and personal property of the Associa11 tion (both tangible and intangible) other than the re12 maining property. Without limiting the preceding

13 sentence, such transferred property shall include all

14 right, title and interest in (A) direct or indirect sub15 sidiaries of the Association (excluding any interest in

16 any government sponsored enterprise), (B) contracts,

17 leases, and other agreements, (C) licenses and other

18 intellectual property, and (D) any other property of

19 the Association. Notwithstanding the preceding provi20 sions of this paragraph, nothing in this paragraph

21 shall be construed to prohibit the Association from

22 transferring remaining property from time to time to

23 the Holding Company or its subsidiaries, subject to

24 the provisions of paragraph (4).
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1 ‘‘(3) TRANSFER OF PERSONNEL.—At the reorga2 nization effective date, employees of the Association

3 shall become employees of the Holding Company (or

4 of the subsidiaries), and the Holding Company (or

5 the subsidiaries or both) shall provide all necessary

6 and appropriate management and operational sup7 port (including loan servicing) to the Association, as

8 requested by the Association. The Association may,

9 however, obtain such management and operational

10 support from other persons or entities.

11 ‘‘(4) DIVIDENDS.—The Association may pay

12 dividends in the form of cash or noncash distributions

13 so long as at the time of the declaration of such divi14 dends, after giving effect to the payment of such divi15 dends as of the date of such declaration by the Board

16 of Directors of the Association, the Association’s cap17 ital would be in compliance with the capital stand18 ards set forth in section 439(r) of this Act. If, at any

19 time after the reorganization effective date, the Asso20 ciation fails to comply with such capital standards,

21 the Holding Company shall be obligated to transfer to

22 the Association additional capital in such amounts as

23 are necessary to ensure that the Association again

24 complies with the capital standards.
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1 ‘‘(5) VALUATION OF NONCASH DISTRIBUTIONS.—

2 After the reorganization effective date, any distribu3 tion of noncash assets by the Association to the Hold4 ing Company shall be valued at book value on the

5 date the Association’s Board of Directors approved

6 such distribution for purposes of calculating compli7 ance with section 439(r) of this Act.

8 ‘‘(6) RESTRICTIONS ON NEW BUSINESS ACTIVITY

9 OR ACQUISITION OF ASSETS BY ASSOCIATION.—After

10 the reorganization effective date, the Association shall

11 not engage in any new business activities or acquire

12 any additional assets other than—

13 ‘‘(A) in connection with (i) student loan

14 purchases through September 30, 2003, and (ii)

15 contractual commitments for future warehousing

16 advances or pursuant to letters of credit or

17 standby bond purchase agreements which are

18 outstanding as of the reorganization effective

19 date;

20 ‘‘(B) in connection with its serving as a

21 lender-of-last-resort pursuant to section 439 of

22 this Act; and

23 ‘‘(C) in connection with its purchase of

24 loans insured under this part, if the Secretary,

25 with the approval of the Secretary of the Treas-
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1 ury, enters into an agreement with the Associa2 tion for the continuation or resumption of its

3 secondary market purchase program because the

4 Secretary determines there is inadequate liquid5 ity for loans made under this part.

6 The Secretary is authorized to enter into an agree7 ment described in subparagraph (C) with the Associa8 tion covering such secondary market activities. Any

9 agreement entered into under subparagraph (C) shall

10 cover a period of 12 months, but may be renewed if

11 the Secretary determines that liquidity remains inad12 equate. The fee provided under section 439(h)(7) shall

13 not apply to loans acquired under any such agree14 ment with the Secretary.

15 ‘‘(7) ISSUANCE OF DEBT OBLIGATIONS DURING

16 THE TRANSITION PERIOD; ATTRIBUTES OF DEBT OBLI17 GATIONS.—After the reorganization effective date, the

18 Association shall not issue debt obligations which ma19 ture later than September 30, 2004, except in connec20 tion with serving as a lender-of-last-resort pursuant

21 to section 439 of this Act or with purchasing loans

22 under an agreement with the Secretary as described

23 in paragraph (6) of this subsection. Nothing in this

24 subsection shall modify the attributes accorded the

25 debt obligations of the Association by section 439, re-
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1 gardless of whether such debt obligations are incurred

2 prior to, or at any time following, the reorganization

3 effective date or are transferred to a trust in accord4 ance with subsection (d).

5 ‘‘(8) MONITORING OF SAFETY AND SOUND6 NESS.—

7 ‘‘(A) OBLIGATION TO OBTAIN, MAINTAIN,

8 AND REPORT INFORMATION.—The Association

9 shall obtain such information and make and

10 keep such records as the Secretary of the Treas11 ury may from time to time prescribe concerning

12 (i) the financial risk to the Association resulting

13 from the activities of any of its associated per14 sons, to the extent such activities are reasonably

15 likely to have a material impact on the financial

16 condition of the Association, including its cap17 ital ratio, its liquidity, or its ability to conduct

18 and finance its operations, and (ii) the Associa19 tion’s policies, procedures, and systems for mon20 itoring and controlling any such financial risk.

21 The Association’s obligations under this sub22 section with respect to any associated person

23 which is a third party servicer (as defined in 34

24 C.F.R. 682.200(b)) shall be limited to providing

25 to the Secretary of the Treasury copies of any re-
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1 ports or other information provided to the Sec2 retary of Education pursuant to 34 C.F.R.

3 682.200 et seq. The Secretary of the Treasury

4 may require summary reports of such informa5 tion to be filed no more frequently than quar6 terly. For purposes of this paragraph, the term

7 ‘associated person’ shall mean any person, other

8 than a natural person, directly or indirectly con9 trolling, controlled by, or under common control

10 with the Association.

11 ‘‘(B) SEPARATE OPERATION OF CORPORA12 TIONS.—

13 ‘‘(i) The funds and assets of the Asso14 ciation shall at all times be maintained sep15 arately from the funds and assets of the

16 Holding Company or any of its other sub17 sidiaries and may be used solely by the As18 sociation to carry out its purposes and to

19 fulfill its obligations.

20 ‘‘(ii) The Association shall maintain

21 books and records that clearly reflect the as22 sets and liabilities of the Association, sepa23 rate from the assets and liabilities of the

24 Holding Company or any of its other sub25 sidiaries.
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1 ‘‘(iii) The Association shall maintain a

2 corporate office that is physically separate

3 from any office of the Holding Company or

4 any of its subsidiaries.

5 ‘‘(iv) No director of the Association

6 that is appointed by the President pursuant

7 to section 439(c)(1)(A) may serve as a di8 rector of the Holding Company.

9 ‘‘(v) At least one officer of the Associa10 tion shall remain an officer solely of the

11 Association.

12 ‘‘(vi) Transactions between the Associa13 tion and the Holding Company or its other

14 subsidiaries, including any loan servicing

15 arrangements, shall be on terms no less fa16 vorable to the Association than the Associa17 tion could obtain from an unrelated third

18 party.

19 ‘‘(vii) The Association shall not extend

20 credit to the Holding Company or any of

21 its affiliates, nor guarantee or provide any

22 credit enhancement to any debt obligations

23 of the Holding Company or any of its affili24 ates.
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1 ‘‘(viii) Any amounts collected on behalf

2 of the Association by the Holding Company

3 or any of its other subsidiaries with respect

4 to the assets of the Association, pursuant to

5 a servicing contract or other arrangement

6 between the Association and the Holding

7 Company or any of its other direct or indi8 rect subsidiaries, shall be collected solely for

9 the benefit of the Association and shall be

10 immediately deposited by the Holding Com11 pany or such other subsidiary to an account

12 under the sole control of the Association.

13 ‘‘(C) ENCUMBRANCE OF ASSETS.—Notwith14 standing any otherwise applicable Federal or

15 State law, rule, or regulation, or legal or equi16 table principle, doctrine, or theory to the con17 trary, under no circumstances shall the assets of

18 the Association be available or used to pay

19 claims or debts of or incurred by the Holding

20 Company. Nothing in this subparagraph shall

21 limit the right of the Association to pay divi22 dends not otherwise prohibited hereunder or

23 limit any liability of the Holding Company ex24 plicitly provided for in this part.
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1 ‘‘(D) HOLDING COMPANY ACTIVITIES.—After

2 the reorganization effective date and prior to the

3 dissolution of the Association in accordance with

4 section 440(d), Holding Company activities shall

5 be limited to ownership of the Association and

6 any other subsidiaries. All business activities

7 shall be conducted through subsidiaries.

8 ‘‘(9) ASSOCIATION BOARD OF DIRECTORS.—Not9 withstanding any other provision of part B of this

10 title, after the reorganization effective date, the 14 di11 rectors of the Association elected by the Association’s

12 stockholders (which immediately after the reorganiza13 tion effective date shall be the Holding Company)

14 shall no longer be required to meet the eligibility re15 quirements set forth in section 439(c).

16 ‘‘(10) ISSUANCE OF STOCK WARRANTS.—At the

17 reorganization effective date, the Holding Company

18 shall issue to the Secretary of the Treasury 200,000

19 stock warrants, each entitling the holder of the stock

20 warrant to purchase from the Holding Company one

21 share of the registered common stock of the Holding

22 Company at any time on or before September 30,

23 2007. The exercise price for such warrants shall be an

24 amount equal to the average closing price of the com25 mon stock of the Association for the 20 business days
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1 prior to and including the date of enactment of this

2 section on the exchange or market which is then the

3 primary exchange or market for the common stock of

4 the Association, subject to any adjustments necessary

5 to reflect the conversion of Association common stock

6 into Holding Company common stock as part of the

7 plan of reorganization approved by the Association’s

8 shareholders.

9 ‘‘(11) RESTRICTIONS ON TRANSFER OF ASSOCIA10 TION SHARES AND BANKRUPTCY OF ASSOCIATION.—

11 After the reorganization effective date, the Holding

12 Company shall not sell, pledge, or otherwise transfer

13 the outstanding shares of the Association, or agree to

14 or cause the liquidation of the Association to file a pe15 tition of bankruptcy under title 11, United States

16 Code, without prior approval of the Secretary of the

17 Treasury and the Secretary of Education.

18 ‘‘(d) TERMINATION OF THE ASSOCIATION.—The Asso19 ciation shall dissolve, and its separate existence shall termi20 nate on September 30, 2007, after discharge of all outstand21 ing debt obligations and liquidation pursuant to this sub22 section. The Association may dissolve pursuant to this sub23 section prior to such date by notifying the Secretary of Edu24 cation and the Secretary of the Treasury of its intention

25 to dissolve, unless within 60 days of receipt of such notice
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1 the Secretary of Education notifies the Association that it

2 continues to be needed to serve as a lender of last resort

3 pursuant to section 439(q) of this Act or continues to be

4 needed to purchase loans under an agreement with the Sec5 retary described in subsection (c)(6) of this section. On the

6 dissolution date, the Association shall take the following ac7 tions:

8 ‘‘(1) ESTABLISHMENT OF A TRUST.—The Asso9 ciation shall, under the terms of an irrevocable trust

10 agreement in form and substance satisfactory to the

11 Secretary of the Treasury, the Association and the ap12 pointed trustee, irrevocably transfer all remaining ob13 ligations of the Association to the trust and irrev14 ocably deposit or cause to be deposited into such trust,

15 to be held as trust funds solely for the benefit of hold16 ers of the remaining obligations, money or direct

17 noncallable obligations of the United States of Amer18 ica or any agency thereof for which payment the full

19 faith and credit of the United States is pledged, ma20 turing as to principal and interest in such amounts

21 and at such times as are determined by the Secretary

22 of the Treasury to be sufficient, without consideration

23 of any significant reinvestment of such interest, to

24 pay the principal of, and interest on, the remaining

25 obligations in accordance with their terms. To the ex-
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1 tent the Association cannot provide money or qualify2 ing obligations in the amount required, the Holding

3 Company shall be required to transfer money or

4 qualifying obligations to the trust in the amount nec5 essary to prevent any deficiency.

6 ‘‘(2) USE OF TRUST ASSETS.—All money, obliga7 tions, or financial assets deposited into the trust pur8 suant to this subsection shall be applied by the trustee

9 to the payment of the remaining obligations assumed

10 by the trust. Upon the fulfillment of the trustee’s du11 ties under the trust, any remaining assets of the trust

12 shall be transferred to the Holding Company or its

13 subsidiaries, or both, as directed by the Holding Com14 pany.

15 ‘‘(3) OBLIGATIONS NOT TRANSFERRED TO THE

16 TRUST.—The Association shall make proper provision

17 for all other obligations of the Association, including

18 the repurchase or redemption, or the making of prop19 er provision for the repurchase or redemption, of any

20 preferred stock of the Association then outstanding.

21 Any obligations of the Association which cannot be

22 fully satisfied shall become liabilities of the Holding

23 Company as of the date of dissolution.

24 ‘‘(4) TRANSFER OF REMAINING ASSETS.—After

25 compliance with paragraphs (1), (2), and (3), the As-
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1 sociation shall transfer to the Holding Company any

2 remaining assets of the Association.

3 ‘‘(e) OPERATION OF THE HOLDING COMPANY.—

4 ‘‘(1) HOLDING COMPANY BOARD OF DIREC5 TORS.—The number and composition of the Board of

6 Directors of the Holding Company shall be deter7 mined as set forth in the Holding Company’s charter

8 or like instrument (as amended from time to time) or

9 bylaws (as amended from time to time) and as per10 missible under the laws of the jurisdiction of its in11 corporation.

12 ‘‘(2) HOLDING COMPANY NAME.—The names of

13 the Holding Company and any direct or indirect sub14 sidiary of the Holding Company other than the Asso15 ciation may not contain the name ‘Student Loan

16 Marketing Association’ or ‘Sallie Mae’.

17 ‘‘(3) USE OF SALLIE MAE NAME.—Subject to

18 paragraph (2), the Association may assign to the

19 Holding Company, or any direct or indirect subsidi20 ary of the Holding Company other than the Associa21 tion, the ‘Sallie Mae’ name as a trademark and serv22 ice mark, except that neither the Holding Company

23 nor any direct or indirect subsidiary of the Holding

24 Company may use the ‘Sallie Mae’ name on, or to

25 identify the issuer of, any debt obligation or other se-
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1 curity offered or sold by the Holding Company or any

2 direct or indirect subsidiary. The Association shall

3 remit to the Secretary of Treasury $5,000,000 during

4 fiscal year 1996 as compensation for the right to as5 sign such trademark or service mark.

6 ‘‘(4) DISCLOSURE REQUIRED.—Until 3 years

7 after the dissolution date, the Holding Company, and

8 any direct or indirect subsidiary of the Holding Com9 pany other than the Association, shall prominently

10 display in any document offering its securities, and

11 in any advertisement or promotional materials which

12 use the ‘Sallie Mae’ name or mark, a statement

13 that—

14 ‘‘(A) neither the Holding Company nor any

15 such subsidiary is a Government-sponsored en16 terprise or instrumentality of the United States;

17 and

18 ‘‘(B) the obligations of the Holding Com19 pany and any such subsidiary are not guaran20 teed by the full faith and credit of the United

21 States.

22 ‘‘(f) STRICT CONSTRUCTION.—Except as specifically

23 set forth in this section, nothing contained in this section

24 shall be construed to limit the authority of the Association

25 as a federally chartered corporation, or of the Holding Com-
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1 pany as a State or District of Columbia chartered corpora2 tion.

3 ‘‘(g) RIGHT TO ENFORCE.—The Secretary of Edu4 cation or the Secretary of the Treasury, as appropriate,

5 may request the Attorney General of the United States to

6 bring an action in the United States District Court for the

7 District of Columbia for the enforcement of any provisions

8 of this section, or may, under the direction or control of

9 the Attorney General, bring such an action. Such court shall

10 have jurisdiction and power to order and require compli11 ance with this section.

12 ‘‘(h) DEADLINE FOR REORGANIZATION EFFECTIVE

13 DATE.—This section shall be of no further force and effect

14 in the event that the reorganization effective date does not

15 occur on or before 18 months after the date of enactment

16 of this section.

17 ‘‘(i) DEFINITIONS.—For purposes of this section:

18 ‘‘(1) The term ‘Association’ means the Student

19 Loan Marketing Association.

20 ‘‘(2) The term ‘dissolution date’ shall mean Sep21 tember 30, 2007, or such earlier date as the Secretary

22 of Education permits the transfer of remaining obli23 gations in accordance with subsection (d) of this sec24 tion.
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1 ‘‘(3) The term ‘reorganization effective date’

2 means the effective date of the reorganization as deter3 mined by the Board of Directors of the Association,

4 which shall not be earlier than the date that stock5 holder approval is obtained pursuant to subsection (b)

6 of this section and shall not be later than the date

7 that is 18 months after the date of enactment of this

8 section.

9 ‘‘(4) The term ‘Holding Company’ means the

10 new business corporation formed pursuant to this sec11 tion by the Association under the laws of any State

12 of the United States or the District of Columbia.

13 ‘‘(5) The term ‘remaining obligations’ shall

14 mean the debt obligations of the Association outstand15 ing as of the dissolution date.

16 ‘‘(6) The term ‘remaining property’ shall mean

17 the following assets and liabilities of the Association

18 which are outstanding as of the reorganization effec19 tive date: (A) debt obligations issued by the Associa20 tion, (B) contracts relating to interest rate, currency,

21 or commodity positions or protections, (C) investment

22 securities owned by the Association, (D) any instru23 ments, assets, or agreements described in section

24 439(d) of this Act (including without limitation all

25 student loans, forward purchase and lending commit-
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1 ments, warehousing advances, academic facilities obli2 gations, letters of credit, standby bond purchase agree3 ments, liquidity agreements, and student loan revenue

4 bonds or other loans), and (E) except as specifically

5 prohibited by this Act, any other nonmaterial assets

6 or liabilities of the Association which the Associa7 tion’s Board of Directors determines to be necessary

8 or appropriate to its operations.

9 ‘‘(7) The term ‘reorganization’ means the re10 structuring event or events (including any merger

11 event) giving effect to the holding company structure

12 described in subsection (a) of this section.

13 ‘‘(8) The term ‘subsidiaries’ shall mean one or

14 more direct or indirect subsidiaries of the Holding

15 Company.’’.

16 (b) TECHNICAL AMENDMENTS.—

17 (1) AMENDMENTS TO THE HIGHER EDUCATION

18 ACT.—Effective on the reorganization effective date

19 (as defined in section 440(h)(3) of the Act, as added

20 by subsection (a))—

21 (A) section 435(d)(1)(F) of the Act (20

22 U.S.C. 1085(d)(1)(F)) is amended by inserting

23 after ‘‘Student Loan Marketing Association’’ the

24 following: ‘‘or the Holding Company of the Stu25 dent Loan Marketing Association, including all
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1 subsidiaries of such Holding Company, created

2 pursuant to section 440 of this Act,’’; and

3 (B) sections 435(d)(1)(G) and

4 428C(a)(1)(A) of such Act (20 U.S.C.

5 1085(d)(1)(G); 1078–3(a)(1)(A)) are each

6 amended by inserting after ‘‘Student Loan Mar7 keting Association’’ the following: ‘‘or the Hold8 ing Company of the Student Loan Marketing As9 sociation, including all subsidiaries of such

10 Holding Company, created pursuant to section

11 440 of this Act’’.

12 (2) ENFORCEMENT OF SAFETY AND SOUNDNESS

13 REQUIREMENTS.—Section 439(r) of the Act (20

14 U.S.C. 1087–2(r)) is amended—

15 (A) by redesignating paragraph (13) as

16 paragraph (15); and

17 (B) by inserting after paragraph (12) the

18 following new paragraph:

19 ‘‘(13) ENFORCEMENT OF SAFETY AND SOUND20 NESS REQUIREMENTS.—The Secretary of Education

21 or the Secretary of the Treasury, as appropriate, may

22 request the Attorney General of the United States to

23 bring an action in the United States District Court

24 for the District of Columbia for the enforcement of

25 any provisions of this subsection, or may, under the
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1 direction or control of the Attorney General, bring

2 such an action. Such court shall have jurisdiction and

3 power to order and require compliance with this sub4 section.’’.

5 (3) CAPITAL RATIO AMENDMENTS.—Section

6 439(r) of the Act is further amended—

7 (A) in paragraph (1)—

8 (i) by striking ‘‘and’’ at the end of sub9 paragraph (A);

10 (ii) by striking the period at the end of

11 subparagraph (B) and inserting ‘‘; and’’;

12 and

13 (iii) by adding at the end the following

14 new subparagraph:

15 ‘‘(C) within 45 days of the end of each cal16 endar quarter, (i) financial statements of the As17 sociation, and (ii) a report setting forth the cal18 culation of the capital ratio of the Association.’’;

19 (B) in paragraph (11), by striking ‘‘para20 graphs (4) and (6)(A)’’ and inserting ‘‘para21 graphs (4), (6)(A), and (14)’’; and

22 (C) by inserting after paragraph (13) (as

23 added by paragraph (2) of this subsection) the

24 following new paragraph:
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1 ‘‘(14) ACTIONS BY SECRETARY.—If the share2 holders of the Association shall have approved a reor3 ganization plan in accordance with section 440(b)

4 and, for any quarter after January 1, 2000, the Asso5 ciation shall have a capital ratio of less than 2.25

6 percent, the Secretary of the Treasury may, until such

7 capital ratio is met, take any one or more of the ac8 tions described in paragraph (7), except that—

9 ‘‘(A) the capital ratio to be restored pursu10 ant to paragraph (7)(D) shall be 2.25 percent;

11 and

12 ‘‘(B) if the relevant capital ratio is in ex13 cess of or equal to 2 percent for such quarter, the

14 Secretary of the Treasury shall defer taking any

15 of the actions set forth in paragraph (7) until

16 the next succeeding quarter and may then pro17 ceed with any such action only if the capital

18 ratio of the Association remains below 2.25 per19 cent.

20 Upon approval by the shareholders of the Association

21 of a reorganization plan in accordance with section

22 440(b) for any period after January 1, 2000, the pro23 visions of paragraphs (4), (5), (6), (8), (9), and (10)

24 shall be of no further application to the Association.’’.
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1 (4) REPEAL OF THE ASSOCIATION’S CHARTER.—

2 Effective on the dissolution date (as defined in section

3 440(h)(2) of the Act, as added by subsection (a)), sec4 tion 439 of the Act (20 U.S.C. 1087–2) is repealed.

5 TITLE II—COLLEGE CONSTRUC6 TION LOAN INSURANCE ASSO7 CIATION

8 SEC. 201. PRIVATIZATION OF COLLEGE CONSTRUCTION

9 LOAN INSURANCE ASSOCIATION.

10 (a) REPEAL OF STATUTORY RESTRICTIONS.—Part D

11 of title VII of the Act (20 U.S.C. 1132f et seq.) is repealed.

12 (b) STATUS OF THE CORPORATION.—

13 (1) STATUS OF THE CORPORATION.—The Cor14 poration shall not be an agency, instrumentality, or

15 establishment of the United States Government and

16 shall not be a ‘‘Government corporation’’ nor a ‘‘Gov17 ernment controlled corporation’’ as defined in section

18 103 of title 5, United States Code. No action under

19 section 1491 of title 28, United States Code (com20 monly known as the Tucker Act) shall be allowable

21 against the United States based on the actions of the

22 Corporation.

23 (2) CORPORATE POWERS.—The Corporation

24 shall have the power to engage in any business or

25 other activities for which corporations may be orga-
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1 nized under the laws of any State of the United

2 States or the District of Columbia. The Corporation

3 shall have the power to enter into contracts, to execute

4 instruments, to incur liabilities, to provide products

5 and services, and to do all things as are necessary or

6 incidental to the proper management of its affairs

7 and the efficient operation of a private, for-profit

8 business.

9 (c) RELATED PRIVATIZATION REQUIREMENTS.—

10 (1) NOTICE REQUIREMENTS.—During the 5-year

11 period following the date of the enactment of this Act,

12 the Corporation shall include in any document offer13 ing the Corporation’s securities, or in any contracts

14 for insurance, guarantee, or reinsurance of obliga15 tions, a statement that—

16 (A) the Corporation is not a Government17 sponsored enterprise or instrumentality of the

18 United States; and

19 (B) the Corporation’s obligations are not

20 guaranteed by the full faith and credit of the

21 United States.

22 (2) CORPORATE CHARTER.—The Corporation’s

23 charter shall be amended as necessary and without

24 delay to conform the requirements of this Act.
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1 (3) CORPORATE NAME.—The name of the Cor2 poration, or of any direct or indirect subsidiary

3 thereof, may not contain the term ‘‘College Construc4 tion Loan Insurance Association’’.

5 (4) ARTICLES OF INCORPORATION.—The Cor6 poration shall amend its articles of incorporation

7 without delay to reflect that one of the purposes of the

8 Corporation shall be to guarantee, insure and rein9 sure bonds, leases, and other evidences of debt of edu10 cational institutions, including Historically Black

11 Colleges and Universities and other academic institu12 tions which are ranked in the lower investment grade

13 category using a nationally recognized credit rating

14 system.

15 (5) TRANSITION REQUIREMENTS.—

16 (A) REQUIREMENTS UNTIL STOCK SALE.—

17 Notwithstanding subsection (a), the requirements

18 of section 754 of the Act (20 U.S.C. 1132f–3), as

19 in existence as of the day before enactment of

20 this Act, shall continue to be effective until the

21 day immediately following the date of closing of

22 the purchase of the Secretary’s stock (or the date

23 of closing of the final purchase, in the case of

24 multiple transactions) pursuant to subsection (d)

25 of this section.
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1 (B) REPORTS AFTER STOCK SALE.—The

2 Corporation shall, not later than March 30 of the

3 first full calendar year immediately following the

4 sale pursuant to subsection (d), and each of the

5 2 succeeding years, submit to the Secretary of

6 Education a report describing the Corporation’s

7 efforts to assist in the financing of education fa8 cilities projects, including projects for elemen9 tary, secondary, and postsecondary educational

10 institution infrastructure, and detailing, on a

11 project-by-project basis, the Corporation’s busi12 ness dealings with educational institutions that

13 are rated by a nationally recognized statistical

14 rating organization at or below the organiza15 tion’s third highest ratings.

16 (d) SALE OF FEDERALLY OWNED STOCK.—

17 (1) SALE OF STOCK REQUIRED.—The Secretary

18 of the Treasury shall, upon the request of the Sec19 retary of Education make every effort to sell, pursu20 ant to section 324 of title 31, United States Code, the

21 voting common stock of the Corporation owned by the

22 Secretary of Education not later than one year after

23 the date of the enactment of this Act.

24 (2) PURCHASE BY THE CORPORATION.—In the

25 event that the Secretary of the Treasury is unable to
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1 sell the voting common stock, or any portion thereof,

2 at a price acceptable to the Secretary of Education

3 and the Secretary of the Treasury within the period

4 specified in paragraph (1), the Corporation shall pur5 chase such stock at a price determined by the Sec6 retary of the Treasury and acceptable to the Corpora7 tion based on independent appraisal by one or more

8 nationally recognized financial firms. Such firms

9 shall be selected by the Secretary of the Treasury in

10 consultation with the Secretary of Education and the

11 Corporation.

12 (e) ASSISTANCE BY THE CORPORATION.—The Corpora13 tion shall provide such assistance as the Secretary of the

14 Treasury and the Secretary of Education may require to

15 facilitate the sale of the stock under this section.

16 (f) DEFINITION.—As used in this section, the term

17 ‘‘Corporation’’ means the Corporation established pursuant

18 to the provision of law repealed by subsection (a).

19 TITLE III—REPEALERS AND

20 OTHER AMENDMENTS

21 SEC. 301. HIGHER EDUCATION PROVISIONS.

22 (a) HIGHER EDUCATION ACT OF 1965 PROVISIONS.—

23 The following provisions of the Higher Education Act of

24 1965 are repealed:
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1 (1) Part B of title I (20 U.S.C. 1011 et seq.), re2 lating to articulation agreements.

3 (2) Part C of title I (20 U.S.C. 1015 et seq.), re4 lating to access and equity to education for all Ameri5 cans through telecommunications.

6 (3) Title II (20 U.S.C. 1021 et seq.), relating to

7 academic libraries and information services.

8 (4) Chapter 2 of subpart 2 of part A of title IV

9 (20 U.S.C. 1070a–21 et seq.), relating to national

10 early intervention scholarships.

11 (5) Chapter 3 of subpart 2 of part A of title IV

12 (20 U.S.C. 1070a–31 et seq.), relating to presidential

13 access scholarships.

14 (6) Chapter 4 of subpart 2 of part A of title IV

15 (20 U.S.C. 1070a–41 et seq.), relating to model pro16 gram community partnerships and counseling grants.

17 (7) Chapter 5 of subpart 2 of part A of title IV

18 (20 U.S.C. 1070a–52 et seq.), relating to an early

19 awareness information program.

20 (8) Chapter 8 of subpart 2 of part A of title IV

21 (20 U.S.C. 1070a–81), relating to technical assistance

22 for teachers and counselors.

23 (9) Subpart 5 of part A of title IV (20 U.S.C.

24 1070d–2), relating to special programs for students
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1 whose families are engaged in migrant and seasonal

2 farmwork.

3 (10) Subpart 8 of part A of title IV (20 U.S.C.

4 1070f), relating to special child care services for dis5 advantaged college students.

6 (11) Section 428J (20 U.S.C. 1078–10), relating

7 to loan forgiveness for teachers, individuals perform8 ing national community service and nurses.

9 (12) Section 486 (20 U.S.C. 1093), relating to

10 training in financial aid services.

11 (13) Subpart 1 of part H of title IV (20 U.S.C.

12 1099a et seq.) relating to State postsecondary review

13 entity programs.

14 (14) Part A of title V (20 U.S.C. 1102 et seq.),

15 relating to State and local programs for teacher excel16 lence.

17 (15) Part B of title V (20 U.S.C. 1103 et seq.),

18 relating to national teacher academies.

19 (16) Subpart 1 of part C of title V (20 U.S.C.

20 1104 et seq.), relating to Douglas teacher scholarships.

21 (17) Subpart 3 of part C of title V (20 U.S.C.

22 1106 et seq.), relating to the teacher corps.

23 (18) Subpart 3 of part D of title V (20 U.S.C.

24 1109 et seq.), relating to class size demonstration

25 grants.
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1 (19) Subpart 4 of part D of title V (20 U.S.C.

2 1110 et seq.), relating to middle school teaching dem3 onstration programs.

4 (20) Subpart 1 of part E of title V (20 U.S.C.

5 1111 et seq.), relating to new teaching careers.

6 (21) Subpart 1 of part F of title V (20 U.S.C.

7 1113 et seq.), relating to the national mini corps pro8 grams.

9 (22) Section 586 (20 U.S.C. 1114), relating to

10 demonstration grants for critical language and area

11 studies.

12 (23) Section 587 (20 U.S.C. 1114a), relating to

13 development of foreign languages and cultures in14 structional materials.

15 (24) Subpart 3 of part F of title V (20 U.S.C.

16 1115), relating to small State teaching initiatives.

17 (25) Subpart 4 of part F of title V (20 U.S.C.

18 1116), relating to faculty development grants.

19 (26) Subpart 5 of part F of title V (20 U.S.C.

20 1117), relating to early childhood staff training and

21 professional enhancement.

22 (27) Section 605 (20 U.S.C. 1124a), relating to

23 intensive summer language institutes.

24 (28) Section 607 (20 U.S.C. 1125a), relating to

25 foreign language periodicals.
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1 (29) Part A of title VII (20 U.S.C. 11326 et

2 seq.), relating to academic and library facilities.

3 (30) Title VIII (20 U.S.C. 1133 et seq.), relating

4 to cooperative education programs.

5 (31) Part A of title IX (20 U.S.C. 1134a et seq.),

6 relating to women and minority participation in

7 graduate education.

8 (32) Part B of title IX (20 U.S.C. 1134d et seq.),

9 relating to Harris fellowships.

10 (33) Part C of title IX (20 U.S.C. 1134h et seq.),

11 relating to Javits fellowships.

12 (34) Part E of title IX (20 U.S.C. 1134r et seq.),

13 relating to the faculty development fellowship pro14 gram.

15 (35) Part F of title IX (20 U.S.C. 1134s et seq.),

16 relating to legal training for the disadvantaged.

17 (36) Part G of title IX (20 U.S.C. 1134u et seq.),

18 relating to law school clinical programs.

19 (37) Section 1011 (20 U.S.C. 1135a–11), relat20 ing to special projects in areas of national need.

21 (38) Subpart 2 of part B of title X (20 U.S.C.

22 1135c et seq.), relating to science and engineering ac23 cess programs.
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1 (39) Part C of title X (20 U.S.C. 1135e et seq.),

2 relating to women and minorities science and engi3 neering outreach demonstration programs.

4 (40) Part D of title X (20 U.S.C. 1135f), relating

5 to Eisenhower leadership programs.

6 (41) Title XI (20 U.S.C. 1136 et seq.), relating

7 to community service programs.

8 (b) EDUCATION AMENDMENTS OF 1986 PROVISIONS.—

9 The following provisions of the Higher Education Amend10 ments of 1986 are repealed:

11 (1) Part E of title XIII (20 U.S.C. 1221–1 note),

12 relating to a National Academy of Science study.

13 (2) Part B of title XV (20 U.S.C. 4441 et seq.),

14 relating to Native Hawaiian culture and art develop15 ment.

16 (c) EDUCATION AMENDMENTS OF 1992 PROVISIONS.—

17 The following provisions of the Higher Education Amend18 ments of 1992 are repealed:

19 (1) Part F of title XIII (25 U.S.C. 3351 et seq.),

20 relating to American Indian postsecondary economic

21 development scholarships.

22 (2) Part G of title XIII (25 U.S.C. 3371), relat23 ing to American Indian teacher training.
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1 (3) Section 1406 (20 U.S.C. 1221e–1 note), relat2 ing to a national survey of factors associated with

3 participation.

4 (4) Section 1409 (20 U.S.C. 1132a note), relat5 ing to a study of environmental hazards in institu6 tions of higher education.

7 (5) Section 1412 (20 U.S.C. 1101 note), relating

8 to a national job bank for teacher recruitment.

9 (6) Part B of title XV (20 U.S.C. 1452 note), re10 lating to a national clearinghouse for postsecondary

11 education materials.

12 (7) Part C of title XV (20 U.S.C. 1101 note), re13 lating to school-based decisionmakers.

14 (8) Part D of title XV (20 U.S.C. 1145h note),

15 relating to grants for sexual offenses education.

16 (9) Part E of title XV (20 U.S.C. 1070 note), re17 lating to Olympic scholarships.

18 (10) Part G of title XV (20 U.S.C. 1070a–11

19 note), relating to advanced placement fee payment

20 programs.

21 (d) CONFORMING AMENDMENTS.—The Act is amend22 ed—

23 (1) in section 453(c)(2)—

24 (A) by striking subparagraph (E); and
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1 (B) by redesignating subparagraphs (F)

2 through (H) as subparagraphs (E) through (G),

3 respectively;

4 (2) in section 487(a)(3), by striking subpara5 graph (B) and redesignating subparagraphs (C) and

6 (D) as subparagraphs (B) and (C), respectively;

7 (3) in section 487(a)(15), by striking ‘‘the Sec8 retary of Veterans Affairs, and State review entities

9 under subpart 1 of part H’’ and inserting ‘‘and the

10 Secretary of Veterans Affairs’’;

11 (4) in section 487(a)(21), by striking ‘‘, State

12 postsecondary review entities,’’;

13 (5) in section 487(c)(1)(A)(i), by striking ‘‘State

14 agencies, and the State review entities referred to in

15 subpart 1 of part H’’ and inserting ‘‘and State agen16 cies’’;

17 (6) in section 487(c)(4), by striking ‘‘, after con18 sultation with each State review entity designated

19 under subpart 1 of part H,’’;

20 (7) in section 487(c)(5), by striking ‘‘State re21 view entities designated under subpart 1 of part H,’’;

22 (8) in section 496(a)(7), by striking ‘‘and the

23 appropriate State postsecondary review entity’’;
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1 (9) in section 496(a)(8), by striking ‘‘and the

2 State postsecondary review entity of the State in

3 which the institution of higher education is located’’;

4 (10) in section 498(g)(2), by striking everything

5 after the first sentence;

6 (11) in section 498A(a)(2)(D), by striking ‘‘by

7 the appropriate State postsecondary review entity

8 designated under subpart 1 of this part or’’;

9 (12) in section 498A(a)(2)—

10 (A) by inserting ‘‘and’’ after the semicolon

11 at the end of subparagraph (E);

12 (B) by striking subparagraph (F); and

13 (C) by redesignating subparagraph (G) as

14 subparagraph (F); and

15 (13) in section 498A(a)(3)—

16 (A) by inserting ‘‘and’’ after the semicolon

17 at the end of subparagraph (C);

18 (B) by striking ‘‘; and’’ at the end of sub19 paragraph (D) and inserting a period; and

20 (C) by striking subparagraph (E).

21 SEC. 302. EFFECTIVE DATE.

22 The repeals and amendments made by this title shall

23 take effect on October 1, 1996.
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1 TITLE IV—GENERAL PROVISIONS

2 RELATING TO STUDENT AS3 SISTANCE PROGRAMS

4 SEC. 401. AMENDMENT TO HIGHER EDUCATION ACT.

5 (a) AMENDMENT.—Section 481(b) of the Act (20

6 U.S.C. 1088(b)) is amended by inserting after the first sen7 tence the following: ‘‘For the purposes of determining wheth8 er an institution meets the requirements of clause (6), the

9 Secretary shall not consider the financial information of

10 any institution for a fiscal year that began on or before

11 April 30, 1994.’’.

12 (b) EFFECTIVE DATE.—The amendment made by sub13 section (a) shall apply to any determination made on or

14 after July 1, 1994, by the Secretary of Education pursuant

15 to section 481(b)(6) of the Act.

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