I

103D CONGRESS

1ST SESSION H. R. 660

To facilitate the providing of loan capital to small business concerns, and

for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 27, 1993

Mr. LAFALCE (for himself, Mr. SMITH of Iowa, Mr. MAZZOLI, and Mr. MANN)

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

Small Business

DECEMBER 14, 1993

Additional sponsors: Mr. SKELTON, Mr. WYDEN, Mr. SISISKY, Mr. CONYERS,

Mr. BILBRAY, Mr. MFUME, Mr. FLAKE, Mr. SARPALIUS, Mr. POSHARD,

Mr. MEEHAN, Ms. DANNER, Mr. STRICKLAND, Mr. TUCKER, Mr. KLINK,

Ms. ROYBAL-ALLARD, Mr. HILLIARD, Mr. LANCASTER, Mr. FRANKS of

Connecticut, Mr. DE LUGO, Mr. HUGHES, Mr. HINCHEY, Mr. WILSON,

Mrs. CLAYTON, Mr. HASTINGS, Mr. JEFFERSON, Mr. STUDDS, Mr.

FALEOMAVAEGA, Mr. LEVY, Ms. SLAUGHTER, Mr. OLVER, Ms. KAPTUR,

Mr. WYNN, Mr. TORRES, Mrs. LLOYD, Mr. GOODLING, and Mr. PASTOR

A BILL

To facilitate the providing of loan capital to small business

concerns, 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 That this Act may be cited as the ‘‘Small Business Credit

4 Availability Act of 1993’’.
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1 SEC. 2. CONGRESSIONAL FINDINGS.

2 The Congress hereby finds that—

3 (1) secondary mortgage markets have success4 fully increased the availability and affordability of

5 long-term residential mortgages through government

6 sponsored enterprises;

7 (2) many smaller, innovative businesses could

8 grow more rapidly, create more jobs, and increase

9 United States competitiveness in world markets if

10 additional long-term capital were available to finance

11 purchases of new plant and equipment;

12 (3) institutional investors are a major source of

13 long-term capital for the United States economy, but

14 such investors are not well equipped to make large

15 numbers of direct loans to individual business firms;

16 (4) commercial banks specialize in short-term

17 business lending and have the facilities and special18 ized expertise to evaluate loan applications and to

19 originate and service the large number of relatively

20 small loans required by smaller innovative busi21 nesses; and

22 (5) a secondary market for industrial mortgages

23 would link the loan production ability of commercial

24 lenders with the long-term investment horizons of

25 pension funds and insurance companies, thereby in26 creasing the efficiency of United States capital mar-
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1 kets and the amount of long-term capital that is

2 available to finance purchases of plant and equip3 ment by smaller innovative businesses.

4 SEC. 3. STATEMENT OF PURPOSE.

5 It is the purpose of this Act—

6 (1) to establish a corporation chartered by the

7 Federal Government as a government sponsored en8 terprise whose function would be to purchase or

9 guarantee loans and facilitate their packaging into

10 pools for sale to institutional investors;

11 (2) to authorize the certification of loan poolers

12 by the corporation;

13 (3) to provide for a secondary marketing ar14 rangement for small business loans that meet the

15 underwriting standards of the Corporation—

16 (A) to increase the availability of long-term

17 credit to small businesses at stable interest

18 rates;

19 (B) to provide greater liquidity and lending

20 capacity in extending credit to small businesses;

21 and

22 (C) to provide an arrangement for new

23 lending to facilitate capital market investments

24 in providing long-term small business funding,

25 including funds at fixed rates of interest; and
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1 (4) to enhance the ability of small businesses to

2 obtain financing by improving the distribution of

3 mortgage financing, particularly from institutional

4 investors.

5 SEC. 4. DEFINITIONS.

6 For the purpose of this Act:

7 (1) BOARD.—The term ‘‘Board’’ means—

8 (A) the interim board of directors estab9 lished in section 6(a), or

10 (B) the permanent board of directors es11 tablished in section 6(b),

12 as the case may be.

13 (2) CERTIFIED POOLER.—The term ‘‘certified

14 pooler’’ means a secondary marketing loan pooler

15 that is certified under section 9 of this Act.

16 (3) CORPORATION.—The term ‘‘Corporation’’

17 means the Venture Enhancement and Loan Develop18 ment Administration for Smaller Undercapitalized

19 Enterprises (Velda Sue) established in section 5 of

20 this Act.

21 (4) GUARANTEE.—The term ‘‘guarantee’’

22 means the guarantee of timely payment of the prin23 cipal and interest on qualified loans or securities

24 representing interests in, or obligations backed by,
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1 pools of such qualified loans in accordance with this

2 Act.

3 (5) INTERIM BOARD.—The term ‘‘interim

4 board’’ means the interim board of directors estab5 lished in section 6(a) of this Act.

6 (6) ORIGINATOR.—The term ‘‘originator’’

7 means any institution, bank, insurance company,

8 business and industrial development company, sav9 ings and loan association, commercial finance com10 pany, trust company, credit union, small business

11 lending company or development company licensed

12 by the Small Business Administration to participate

13 in financing programs under the Small Business Act

14 or the Small Business Investment Act of 1958, or

15 other entity that originates and services loans.

16 (7) PERMANENT BOARD.—The term ‘‘perma17 nent board’’ means the permanent board of directors

18 established in section 6(b) of this Act.

19 (8) QUALIFIED LOAN.—The term ‘‘qualified

20 loan’’ means an extension of credit which—

21 (A) is secured by a fee-simple or lease hold

22 mortgage with status as a first lien on real es23 tate located in the United States or which is se24 cured by an unsubordinated lien on any other
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1 type of property or equipment as the Board

2 deems appropriate;

3 (B) is used to finance the acquisition, re4 habilitation, renovation, modernization, refur5 bishing, or improvement of land, facilities,

6 buildings or equipment used for productive

7 business activities conducted in the United

8 States;

9 (C) is an obligation of a person, corpora10 tion, or partnership that has training or busi11 ness experience that, under criteria established

12 by the Corporation, is sufficient to ensure a

13 reasonable likelihood that the loan will be re14 paid according to its terms; and

15 (D) is an obligation of a small business

16 concern.

17 (9) SMALL BUSINESS CONCERN.—The term

18 ‘‘Small Business Concern’’ means a concern which is

19 independently owned and operated and which is not

20 dominant in its field of operations and which, to21 gether with its affiliates—

22 (A) qualifies for loans under section 7(a)

23 of the Small Business Act under standards pro24 mulgated by the Small Business Administra25 tion, or
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1 (B) does not have net worth in excess of

2 $18,000,000 and does not have an average net

3 income, after Federal income taxes, for the pre4 ceding two years in excess of $6,000,000 (aver5 age net income to be computed without benefit

6 of any carryover loss).

7 (10) STATE.—The term ‘‘State’’ has the mean8 ing given such term in section 3 of the Small Busi9 ness Act.

10 SEC. 5. VENTURE ENHANCEMENT AND LOAN DEVELOP11 MENT ADMINISTRATION FOR SMALLER

12 UNDERCAPITALIZED ENTERPRISES.

13 (a) ESTABLISHMENT.—There is hereby established a

14 corporation to be known as the Venture Enhancement and

15 Loan Development Administration for Smaller

16 Undercapitalized Enterprises, which shall be a federally

17 chartered instrumentality of the United States.

18 (b) DUTIES.—The Corporation shall—

19 (1) in consultation with originators, develop

20 uniform underwriting, security appraisal, and repay21 ment standards for qualified loans;

22 (2) determine the eligibility of certified poolers

23 to contract with the Corporation for the provision of

24 guarantees for specific mortgage pools; and
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1 (3) provide guarantees for the timely repayment

2 of principal and interest on qualified loans and secu3 rities representing interest in, or obligations backed

4 by, pools of qualified loans.

5 SEC. 6. BOARD OF DIRECTORS.

6 (a) INTERIM BOARD.—

7 (1) NUMBER AND APPOINTMENT.—Until the

8 permanent board of directors established in sub9 section (b) first meets with a quorum of its members

10 present, the Corporation shall be under the manage11 ment of an interim board of directors composed of

12 seven members appointed by the President within

13 ninety days after the effective date of this Act as fol14 lows:

15 (A) three members appointed from among

16 persons who are representatives of banks, other

17 financial institutions or entities, and insurance

18 companies,

19 (B) two members appointed from among

20 persons who are representative of small busi21 ness, one of whom shall be an owner or opera22 tor of a small business,

23 (C) two members appointed from among

24 persons who represent the interests of the gen25 eral public and who are not serving, and have
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1 not served, as a director or officer of any finan2 cial institution or entity.

3 (2) POLITICAL AFFILIATION.—Not more than

4 four members of the interim board shall be of the

5 same political party.

6 (3) VACANCY.—A vacancy in the interim board

7 shall be filled in the manner in which the original

8 appointment was made.

9 (4) TERMS.—The members of the interim board

10 shall be appointed for the life of such board.

11 (5) QUORUM.—Four members of the interim

12 board shall constitute a quorum.

13 (6) CHAIRPERSON.—The President shall des14 ignate one of the members of the interim board as

15 the chairperson of the interim board.

16 (7) MEETINGS.—The interim board shall meet

17 at the call of the chairperson or a majority of its

18 members.

19 (8) VOTING COMMON STOCK.—

20 (A) INITIAL OFFERING.—Upon the ap21 pointment of sufficient members of the interim

22 board to convene a meeting with a quorum

23 present, the interim board shall arrange for an

24 initial offering of common stock and shall take
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1 whatever other actions are necessary to proceed

2 with the operations of the Corporation.

3 (B) PURCHASES.—The voting common

4 stock shall be offered to originators and to cer5 tified poolers.

6 (9) TERMINATION.—The interim board shall

7 terminate when the permanent board of directors es8 tablished in subsection (b) first meets with a

9 quorum present.

10 (b) PERMANENT BOARD.—

11 (1) ESTABLISHMENT.—Immediately after the

12 date that at least $30,000,000 of common stock of

13 the Corporation has been purchased and fully paid

14 for, the Corporation shall arrange for the election

15 and appointment of a permanent board of directors.

16 After the termination of the interim board of direc17 tors, the Corporation shall be under the manage18 ment of the permanent board.

19 (2) COMPOSITION.—The permanent board shall

20 consist of nine members, of which—

21 (A) five members shall be elected by hold22 ers of common stock of the Corporation; and

23 (B) four members shall be appointed by

24 the President, by and with the advice and con-
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1 sent of the Senate; of the members so ap2 pointed,—

3 (i) none shall be, or have been, an

4 owner, officer or director of any financial

5 institution or financial entity;

6 (ii) all shall be representatives of the

7 general public;

8 (iii) not more than two shall be mem9 bers of the same political party; and

10 (iv) at least one shall be experienced

11 in operating a small business and shall be

12 a representative of small business.

13 (3) PRESIDENTIAL APPOINTEES.—The Presi14 dent shall appoint the members of the permanent

15 board referred to in paragraph (2)(B) not later than

16 60 days after the stock sale referred to in paragraph

17 (1).

18 (4) VACANCY.—

19 (A) ELECTED MEMBERS.—Subject to para20 graph (6), a vacancy among the members elect21 ed to the permanent board in the manner de22 scribed in paragraph (2)(A) shall be filled by

23 the permanent board from among persons eligi24 ble for election to the position for which the

25 vacancy exists.
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1 (B) APPOINTED MEMBERS.—A vacancy

2 among the members appointed to the perma3 nent board under paragraph (2)(B) shall be

4 filled in the manner in which the original

5 appointment was made.

6 (5) CONTINUATION OF MEMBERSHIP.—If—

7 (A) any member of the permanent board

8 who was elected to the permanent board from

9 among persons who are representatives of origi10 nators ceases to be such a representative, or

11 (B) any member who was appointed by the

12 President becomes an owner, officer or director

13 of any financial institution or entity,

14 such member may continue as a member for not

15 longer than a forty five-day period beginning on the

16 date such member ceases to be such a representa17 tive.

18 (6) TERMS.—

19 (A) APPOINTED MEMBERS.—The members

20 appointed by the President shall serve until

21 their successors have been appointed and have

22 qualified. The terms of such members shall be

23 staggered as follows: one shall serve an initial

24 term of one year, one an initial term of two

25 years, one an initial term of three years, and
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1 one an initial term of four years. All subsequent

2 appointments shall be for a term of four years

3 except that any vacancy shall be filled for the

4 unexpired term of the vacancy. Such members

5 shall be removed only for cause.

6 (B) ELECTED MEMBERS.—The members

7 elected under paragraph (2)(A) shall each be

8 elected annually for a term ending on the date

9 of the next annual meeting of the common

10 stockholders of the Corporation and shall serve

11 until their successors are elected and qualified.

12 (C) VACANCY APPOINTMENT.—Any mem13 ber elected or appointed to fill a vacancy occur14 ring before the expiration of the term for which

15 the predecessor of the member was appointed

16 shall be elected or appointed, as the case may

17 be, only for the remainder of such term.

18 (D) SERVICE AFTER EXPIRATION OF

19 TERM.—A number may serve after the expira20 tion of the term of the member until the succes21 sor of the member has taken office.

22 (7) QUORUM.—Five members of the permanent

23 board shall constitute a quorum.

24 (8) NO ADDITIONAL PAY FOR FEDERAL OFFI25 CERS OR EMPLOYEES.—Members of the permanent
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1 board who are full time officers or employees of the

2 United States shall receive no additional pay by rea3 son of service on the permanent board.

4 (9) CHAIRPERSON.—The President shall des5 ignate one of the members of the permanent board

6 who are appointed by the President as the chair7 person of the permanent board.

8 (10) MEETINGS.—The permanent board shall

9 meet at the call of the chairperson or a majority of

10 its members.

11 (c) OFFICERS AND STAFF.—The Board may appoint,

12 employ, fix the pay of, and provide other allowances and

13 benefits for such officers and employees of the Corporation

14 as the Board determines to be appropriate.

15 SEC. 7. POWERS AND DUTIES OF CORPORATION AND

16 BOARD.

17 (a) AUTHORITY.—After the Board has been duly con18 stituted, subject to the other provisions of this Act and

19 other commitments and requirements established pursu20 ant to law, the Corporation may guarantee, on such terms

21 and conditions as it determines, qualified loans or securi22 ties issued on the security of, or in participation in, pooled

23 interests in qualified loans, or it may issue securities based

24 on the security of, or in participation in, pooled interests

25 in qualified loans as provided in section 10.
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1 (b) OBLIGATIONS.—

2 (1) The aggregate amount of obligations of the

3 Corporation and obligations and securities guaran4 teed by the Corporation outstanding at any one time

5 shall not exceed thirty times the sum of its capital,

6 capital surplus, general surplus, reserves, and undis7 tributed earnings, expressly excluding subordinated

8 obligations, unless, based on amounts needed to as9 sure reasonable safety and soundness of the Cor10 poration and with due consideration of the need for

11 the Corporation to facilitate the extension of long

12 term credit to small businesses, the Secretary of the

13 Treasury establishes a higher or lower ratio.

14 (2) All obligations issued by the Corporation or

15 guaranteed by the Corporation shall be approved by

16 a majority vote of the Board of Directors and shall

17 be issued at such times and contain such terms and

18 conditions as the Corporation shall determine, with

19 approval of the Secretary of the Treasury. The Sec20 retary shall not approve the issuance of any obliga21 tions or guarantees if he determines that the issu22 ance would impair the financial safety or soundness

23 of the Corporation. In no event shall the Corporation

24 issue obligations or guarantees if the amount of its

25 net realized earnings deficit exceeds or thereby
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1 would exceed the sum of its capital, capital surplus,

2 general surplus, reserves and undistributed earnings.

3 (c) DUTIES OF THE BOARD.—The Board shall—

4 (A) determine the general policies that

5 shall govern the operations of the Corporation;

6 (B) select, appoint, and determine the

7 compensation of qualified persons to fill such

8 offices as may be provided for in the bylaws of

9 the Corporation; and

10 (C) assign to such persons such executive

11 functions, powers, and duties as may be pre12 scribed by the bylaws of the Corporation or by

13 the Board.

14 (d) POWERS OF THE CORPORATION.—The Corpora15 tion shall be a body corporate and shall have the following

16 powers:

17 (1) To operate under the direction of its Board.

18 (2) To issues stock in the manner provided in

19 section 8.

20 (3) To adopt, alter, and use a corporate seal,

21 which shall be judicially noted.

22 (4) To provide for a president, one or more vice

23 presidents, secretary, treasurer, and such other offi24 cers, employees, and agents, as may be necessary,

25 define their duties and compensation levels, all with-
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1 out regard to title 5, United States Code, and re2 quire surety bonds or make other provisions against

3 losses occasioned by acts of the persons.

4 (5) To provide guarantees and issue obligations

5 in the manner provided under section 10.

6 (6) To have succession until dissolved by a law

7 enacted by the Congress.

8 (7) To prescribe bylaws, through the Board, not

9 inconsistent with law, that shall provide for—

10 (A) the classes of the stock of the Corpora11 tion; and

12 (B) the manner in which—

13 (i) the stock shall be issued, trans14 ferred, and retired;

15 (ii) the officers, employees, and agents

16 of the Corporation are selected;

17 (iii) the property of the Corporation is

18 acquired, held, and transferred;

19 (iv) the commitments are made and

20 other financial assistance of the Corpora21 tion is provided;

22 (v) the general business of the Cor23 poration is conducted; and

24 (vi) the privileges granted by law to

25 the Corporation are exercised and enjoyed;
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1 (8) To prescribe such standards as may be nec2 essary to carry out this Act.

3 (9) To enter into contracts and make payments

4 with respect to the contracts.

5 (10) To prescribe and impose fees and charges

6 for services by and guarantees of the Corporation as

7 provided in section 12;

8 (11) To settle, adjust, and compromise, and

9 with or without consideration or benefit to the Cor10 poration, to release or waive in whole or in part, in

11 advance or otherwise, any claim, demand or right of,

12 by, or against the Corporation.

13 (12) To sue and be sued in its corporate capac14 ity and to complain and defend in any action

15 brought by or against the Corporation in any State

16 or Federal court of competent jurisdiction.

17 (13) To make and perform contracts, agree18 ments, and commitments.

19 (14) To acquire, hold, lease, mortgage or dis20 pose of, at public or private sale, real and personal

21 property, purchase or sell any securities and obliga22 tions, and otherwise exercise all the usual incidents

23 or ownership of property necessary and convenient

24 to the business of the Corporation.
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1 (15) To exercise such other incidental powers

2 as are necessary to carry out the powers, duties, and

3 functions of the Corporation in accordance with this

4 Act.

5 (e) FEDERAL RESERVE BANK AS DEPOSITORIES AND

6 FISCAL AGENTS.—Notwithstanding any other provision of

7 law, any depository institution, as defined in section

8 19(b)(1)(A) of the Federal Reserve Act (12 U.S.C.

9 461(b)(1)(A)), shall be authorized to make payments to

10 the Corporation of the capital contributions referred to in

11 this Act, to receive stock of the Corporation evidencing

12 such capital contributions, and to dispose of such stock,

13 subject to the provisions of this Act. It may also act as

14 a depository for, or as a fiscal agent or custodian of, the

15 Corporation.

16 SEC. 8. STOCK ISSUANCE.

17 (a) VOTING COMMON STOCK.—

18 (1) ISSUE.—The Corporation shall issue voting

19 common stock having such par value as may be fixed

20 by the Board from time to time. Each share of

21 voting common stock shall be entitled to one vote

22 with rights of cumulative voting at all elections of di23 rectors.

24 (2) AUTHORITY OF BOARD TO ESTABLISH

25 TERMS AND PROCEDURES.—The Board shall adopt
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1 such terms, conditions, and procedures with regard

2 to the issue of stock under this section as may be

3 necessary, including the establishment of a maxi4 mum amount limitation on the number of shares of

5 voting common stock that may be outstanding at

6 any time.

7 (3) TRANSFERABILITY.—Subject to such limita8 tions as the Board may impose, any share of any

9 class of voting common stock issued under this sec10 tion shall be transferable, except that, as to the Cor11 poration, such shares shall be transferable only on

12 the books of the Corporation.

13 (b) REQUIRED CAPITAL CONTRIBUTIONS.—

14 (1) IN GENERAL.—The Corporation may re15 quire each originator and each certified pooler to

16 make, or commit to make, such nonrefundable cap17 ital contributions to the Corporation as are reason18 able and necessary to meet the administrative ex19 penses of the Corporation and to contribute to the

20 financial safety and soundness of the Corporation.

21 (2) STOCK ISSUED AS CONSIDERATION FOR

22 CONTRIBUTION.—The Corporation, from time to

23 time, shall issue to each originator or certified pooler

24 voting common stock evidencing any capital con25 tributions made pursuant to this subsection.
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1 (c) DIVIDENDS.—

2 (1) IN GENERAL.—Such dividends as may be

3 declared by the Board, in its discretion, shall be paid

4 by the Corporation to the holders of the voting com5 mon stock of the Corporation pro rata based on the

6 total number of shares.

7 (2) RESERVE REQUIREMENTS.—No dividend

8 may be declared or paid by the Board under this

9 section unless the Board determines that adequate

10 provision has been made for reserves.

11 (3) DIVIDENDS PROHIBITED WHILE OBLIGA12 TIONS ARE OUTSTANDING.—No dividend may be de13 clared or paid by the Board under this section while

14 any obligation issued by the Corporation to the Sec15 retary of the Treasury under section 15 remains

16 outstanding.

17 (d) NONVOTING COMMON STOCK.—The Corporation

18 is authorized to issue nonvoting common stock having

19 such par value as may be determined by the Board from

20 time to time. Such nonvoting common stock shall be freely

21 transferable, except that, as to the Corporation, such stock

22 shall be transferable only on the books of the Corporation.

23 Such dividends as may be declared by the Board, in the

24 discretion of the Board, to the holders of voting common

25 stock shall also be declared by the Corporation to the hold-
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1 ers of the nonvoting common stock of the Corporation,

2 subject to paragraphs (2) and (3) of subsection (c).

3 (e) PREFERRED STOCK.—

4 (1) AUTHORITY OF BOARD.—The Corporation

5 is authorized to issue nonvoting preferred stock hav6 ing such par value as may be fixed by the Board

7 from time to time. Such preferred stock issued shall

8 be freely transferable, except that, as to the Cor9 poration, such stock shall be transferred only on the

10 books of the Corporation.

11 (2) RIGHTS OF PREFERRED STOCK.—Subject to

12 paragraphs (2) and (3) of subsection (c), the holders

13 of the preferred stock shall be entitled to such rate

14 of cumulative dividends, and such holders shall be

15 subject to such redemption or other conversion pro16 visions, as may be provided for at the time of issu17 ance. No dividends shall be payable on any share of

18 common stock at any time when any dividend is due

19 on any share of preferred stock and has not been

20 paid.

21 (3) PREFERENCE ON TERMINATION OF BUSI22 NESS.—In the event of any liquidation, dissolution,

23 or winding up of the business of the Corporation,

24 the holders of the preferred shares of stock shall be

25 paid in full at the par value thereof, plus all accrued
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1 dividends, before the holders of the common shares

2 receive any payment.

3 SEC 9. CERTIFICATION OF LOAN POOLERS.

4 (a) ELIGIBILITY STANDARDS.—

5 (1) ESTABLISHMENT REQUIRED.—Within one

6 hundred and eighty days after the date on which the

7 permanent board first meets with a quorum present,

8 the Corporation shall issue standards for the certifi9 cation of loan poolers, including eligibility standards

10 in accordance with paragraph (2).

11 (2) MINIMUM REQUIREMENTS.—To be eligible

12 to be certified under the standards referred to in

13 paragraph (1), a loan pooler shall—

14 (A) meet or exceed capital standards estab15 lished by the Board;

16 (B) have as one of his purposes, the sale

17 or resale of securities representing interests in,

18 or obligations backed by, pools of qualified

19 loans that have been guaranteed by the Cor20 poration;

21 (C) demonstrate managerial ability with

22 respect to loan underwriting, servicing, and

23 marketing that is acceptable to the Corporation;

24 (D) adopt appropriate loan underwriting,

25 appraisal, and servicing standards and proce-
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1 dures that meet or exceed the standards estab2 lished by the Board;

3 (E) for purposes of enabling the Corpora4 tion to examine the pooler, agree to allow offi5 cers or employees of the Corporation to have

6 access to all books, accounts, financial records,

7 reports, files, and all other papers, things, or

8 property, of any type whatsoever, belonging to

9 or used by such pooler that are necessary to fa10 cilitate an examination of his operations in con11 nection with securities, and the pools of quali12 fied loans that back securities, for which the

13 Corporation has provided guarantees; and

14 (F) adopt appropriate minimum standards

15 and procedures relating to loan administration

16 and disclosure to borrowers concerning the

17 terms and rights applicable to loans for which

18 a guarantee is provided, in conformity with uni19 form standards established by the Corporation.

20 (b) CERTIFICATION BY CORPORATION.—Within one

21 hundred and twenty days after receiving an application for

22 certification under this section, the Corporation shall cer23 tify the pooler if the applicant meets the standards estab24 lished by the Corporation under subsection (a).
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1 (c) MAXIMUM TIME PERIOD FOR CERTIFICATION.—

2 Any certification by the Corporation shall be effective for

3 a period determined by the Corporation, but not to exceed

4 five years.

5 (d) REVOCATION.—

6 (1) IN GENERAL.—After notice and an oppor7 tunity for a hearing, the Corporation may revoke the

8 certification of a pooler if the Corporation deter9 mines that such pooler no longer meets the stand10 ards referred to in subsection (a).

11 (2) EFFECT OF REVOCATION.—Revocation of a

12 certification shall not affect any pool guarantee that

13 has been issued by the Corporation.

14 SEC. 10. GUARANTEES AND OTHER OBLIGATIONS.

15 (a) GUARANTEE AUTHORIZED.—

16 (1) IN GENERAL.—Subject to the requirements

17 of this section and on such other terms and condi18 tions as the Corporation shall consider appropriate,

19 the Corporation shall guarantee the timely payment

20 of not to exceed 80 per centum of principal and in21 terest on qualified loans and 100 per centum of the

22 securities issued by a certified pooler that represent

23 the guaranteed portion of interests in, or obligations

24 backed by, any pool of qualified loans held by such

25 certified pooler.
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1 (2) DEFAULT.—If the issuer is unable to make

2 any payment of principal or interest on any qualified

3 loan, or security for which a guarantee has been pro4 vided by the Corporation under paragraph (1), sub5 ject to the provisions of subsection (b) the Corpora6 tion shall make such payment as and when due in

7 cash, and on such payment shall be subrogated fully

8 to the rights satisfied by such payment.

9 (3) POWER OF CORPORATION.—Notwithstand10 ing any other provision of law, the Corporation is

11 empowered, in connection with any guarantee under

12 this subsection, whether before or after any default,

13 to provide by contract with the issuer for the extin14 guishment, on default by the issuer, of any redemp15 tion, equitable, legal, or other right, title, or interest

16 of the issuer in any mortgage or mortgages con17 stituting the security for the loan or pool against

18 which the guaranteed securities are issued. In the

19 event of default and pursuant to the terms of the

20 contract, the mortgages that constitute such security

21 or pool shall, proportionate to the current ownership

22 interests in the amount of the loans originally re23 tained by the originators, become the absolute prop24 erty of the Corporation subject only to the

25 unsatisfied rights of the holders of the securities.
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1 (b) STANDARDS REQUIRING DIVERSIFIED POOLS.—

2 (1) IN GENERAL.—To reduce the risks incurred

3 by the Corporation in providing guarantees under

4 this section and to further the purposes of this Act,

5 the Board shall establish standards governing the

6 composition of each pool (in connection with which

7 such guarantees are provided) over the period during

8 which the commitment to provide guarantees is ef9 fective.

10 (2) MINIMUM CRITERIA FOR LOAN POOLS.—

11 The standards established by the Board pursuant to

12 paragraph (1) for pools of qualified loans shall, at

13 a minimum—

14 (A) require that any pool of loans, if fea15 sible based upon the size of the pool—

16 (i) include security interests that are

17 distributed geographically; and

18 (ii) vary in terms of amounts of prin19 cipal;

20 (B) prohibit the inclusion in any such pool

21 of—

22 (i) any loan the principal amount of

23 which exceeds 5 per centum of the aggre24 gate amount of principal of all loans in

25 such pool; and
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1 (ii) two or more loans to related bor2 rowers; and

3 (C) require that each pool consist of not

4 less than twenty loans.

5 (c) OTHER RESPONSIBILITIES OF AND LIMITATIONS

6 ON POOLERS.—As a condition for providing any guaran7 tees under this section for securities issued by a certified

8 pooler that represent interests in, or obligations backed

9 by, any pool of qualified loans, the Corporation shall re10 quire such pooler to agree to comply with the following

11 requirements:

12 (1) DEFAULT RESOLUTION.—The pooler shall

13 act in accordance with the standards of a prudent

14 institutional lender to resolve defaults.

15 (2) SUBROGATION OF UNITED STATES AND

16 CORPORATION TO INTERESTS OF POOLER.—The pro17 ceeds of any collateral, judgments, settlements, or

18 guarantees received by the pooler with respect to any

19 loan in such pool shall be applied, after payment of

20 costs of collection—

21 (A) first, to reduce the amount of any

22 principal outstanding on any obligation of the

23 Corporation that was purchased by the Sec24 retary of the Treasury under section 15 to the

25 extent the proceeds of such obligation were used
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1 to pay claims for guarantees in connection with

2 such securities; and

3 (B) second, to reimburse the Corporation

4 for any such guarantee payments.

5 (3) SERVICING.—The originator of any loan in

6 such pool shall be permitted, at his option, to retain

7 the right to service the loan.

8 (4) COMPLIANCE WITH DIVERSIFIED POOL

9 STANDARDS.—The pooler shall comply with the

10 standards adopted by the Board under subsection

11 (b) in establishing and maintaining the pool.

12 (5) MINORITY PARTICIPATION IN PUBLIC OF13 FERINGS.—The pooler shall take such steps as may

14 be necessary to ensure that minority owned or con15 trolled investment banking firms, underwriters, and

16 bond counsels throughout the United States have an

17 opportunity to participate to a significant degree in

18 any public offering of securities.

19 (d) ADDITIONAL AUTHORITY OF THE BOARD.—To

20 ensure the liquidity of securities for which guarantees have

21 been provided under this section, the Board shall adopt

22 appropriate standards regarding—

23 (1) the characteristics of any pool of qualified

24 loans serving as collateral for such securities;
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1 (2) registration requirements (if any) with re2 spect to such securities; and

3 (3) transfer requirements.

4 (e) In addition to the guarantees authorized herein,

5 the Corporation may purchase 80 per centum of the prin6 cipal amount of qualified loans. If it makes such pur7 chases, it shall promptly issue an equivalent amount of

8 securities which are based on the security of, or in partici9 pation in, pooled interests in the purchased portion of the

10 qualified loans.

11 SEC. 11. STANDARDS FOR QUALIFIED LOANS.

12 (a) STANDARDS.—Not later than one hundred and

13 eighty days after the appointment and election of the

14 Board, the Corporation, in consultation with originators,

15 shall establish uniform underwriting, security appraisal,

16 and repayment standards for qualified loans. In establish17 ing standards for qualified loans, the Corporation shall

18 limit eligibility, so far as practicable, to loans that are

19 deemed by the Board to be of such quality so as to meet,

20 substantially and generally, the purchase standards im21 posed by private institutional investors.

22 (b) MINIMUM CRITERIA.—To further the purpose of

23 this Act to provide a new source of long-term fixed rate

24 financing to assist small businesses, the standards estab-
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1 lished by the Board pursuant to subsection (a) shall, at

2 a minimum—

3 (1) set the maximum principal amount of any

4 loan which the Corporation will purchase or guaran5 tee;

6 (2) limit the maximum term of the loan to thir7 ty years in the case of land or facilities or to ten

8 years in the case of equipment, but in no event

9 longer than the useful life of the property;

10 (3) require that the principal amount of the

11 loan will be fully amortized over the life of the loan;

12 (4) provide that no loan shall have a loan-to13 value ratio in excess of 90 per centum;

14 (5) require each borrower to demonstrate suffi15 cient cashflow to adequately service the loan;

16 (6) contain sufficient documentation standards;

17 and

18 (7) contain adequate standards to protect the

19 integrity of the appraisal process with respect to any

20 loan.

21 (c) CONGRESSIONAL REVIEW.—No standard pre22 scribed under this section shall take effect before the later

23 of—
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1 (1) the end of a period consisting of thirty leg2 islative days and beginning on the date such stand3 ards are submitted to the Congress; or

4 (2) the end of a period consisting of ninety cal5 endar days and beginning on such date the stand6 ards are submitted.

7 (e) NONDISCRIMINATION REQUIREMENT.—The

8 standards established under subsection (a) shall not dis9 criminate against small originators or small mortgage

10 loans that are at least $50,000.

11 SEC. 12. FUNDING FOR GUARANTEE RESERVES OF COR12 PORATION.

13 (a) GUARANTEE FEES.—

14 (1) LOAN FEE.—At the time a guarantee is is15 sued for a qualified loan by the Corporation or at

16 the time the Corporation purchases a loan pursuant

17 to section 10(e), the Corporation shall assess the

18 originator a fee of not more than 2 per centum of

19 the initial principal amount of the loan.

20 (2) POOLER FEE.—At the time a guarantee is

21 issued for securities issued by a qualified pooler, the

22 Corporation shall assess such pooler an additional

23 fee of not more than one-half of 1 per centum of the

24 principal amount of the loans then constituting the

25 pool if the originator has already paid the fee for
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1 guarantee of a qualified loan as provided in para2 graph (1). If the pool includes any loan on which the

3 originator has not paid a guarantee fee, the Cor4 poration shall assess the pooler a fee of not more

than 21 5 ⁄2 per centum of the principal amount of any

6 such loan.

7 (3) DETERMINATION OF AMOUNT.—The Cor8 poration shall establish such fees based on the

9 amount of risk incurred by the Corporation in pro10 viding the financial assistance or guarantees with re11 spect to which such fee is assessed, as determined by

12 the Corporation. Fees assessed under paragraphs (1)

13 or (2) shall be established on an actuarially sound

14 basis, but not to exceed the per centums specified.

15 (b) ANNUAL REVIEW BY GAO.—The Comptroller

16 General of the United States shall annually review, and

17 submit to the Congress a report regarding, the actuarial

18 soundness and reasonableness of the fees established and

19 amounts collected by the Corporation under this sub20 section.

21 (c) CORPORATION RESERVE AGAINST GUARANTEE

22 LOSSES REQUIRED.—

23 (1) IN GENERAL.—So much of the fees assessed

24 under this section as the Board determines to be

25 necessary shall be set aside by the Corporation in a
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1 segregated account as a reserve against losses aris2 ing out of the guarantee activities of the Corpora3 tion.

4 (2) EXHAUSTION OF RESERVE REQUIRED.—

5 The Corporation may not issue obligations to the

6 Secretary of the Treasury under section 15 in order

7 to meet the obligations of the Corporation with re8 spect to any guarantees or securities issued provided

9 under this Act until the reserve established under

10 paragraph (1) has been exhausted.

11 (d) FEES TO COVER ADMINISTRATIVE COSTS AU12 THORIZED.—The Corporation may impose charges or fees

13 in reasonable amounts in connection with the administra14 tion of its activities under this Act to recover its costs for

15 performing such administration.

16 SEC. 13. SUPERVISION, EXAMINATION, AND REPORT OF

17 CONDITION.

18 (a) REGULATION.—

19 (1) AUTHORITY.—The Secretary of the Treas20 ury (hereinafter in this section referred to as the

21 Secretary) is authorized and directed to examine the

22 financial condition of the Corporation and its activi23 ties. The Secretary shall have general regulatory

24 power over the Corporation to insure that the pur25 poses of this Act are accomplished, especially with
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1 respect to the Corporation’s safety and soundness

2 and the safe and sound performance of the Corpora3 tion’s powers, functions and duties.

4 (2) CONSIDERATIONS.—In exercising its au5 thority pursuant to this section, the Secretary shall

6 consider—

7 (A) the purposes for which the Corporation

8 was created;

9 (B) the practices appropriate to the con10 duct of secondary markets in loans; and

11 (C) the reduced levels of risk associated

12 with appropriately structured secondary market

13 transactions.

14 (b) EXAMINATIONS AND AUDITS.—

15 (1) IN GENERAL.—The financial transactions of

16 the Corporation shall be examined by examiners of

17 the Secretary in accordance with the principles and

18 procedures applicable to commercial corporate trans19 actions under such rules and regulations as may be

20 prescribed by the Secretary.

21 (2) FREQUENCY.—The examinations shall

22 occur at such times as the Secretary may determine,

23 but in no event less than once each year.

24 (3) ACCESS.—The examiners shall—
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1 (A) have access to all books, accounts, fi2 nancial records, reports, rules, and all other pa3 pers, things, or property belonging to or in use

4 by the Corporation and necessary to facilitate

5 the audit; and

6 (B) be afforded full access for verifying

7 transactions with certified poolers and other en8 tities with whom the Corporation conducts

9 transactions.

10 (c) ANNUAL REPORT OF CONDITION.—The Corpora11 tion shall make and publish an annual report of condition

12 as prescribed by the Secretary. Each report shall contain

13 financial statements prepared in accordance with generally

14 accepted accounting principles and contain such additional

15 information as the Secretary may by regulation prescribe.

16 The financial statements of the Corporation shall be au17 dited by an independent public accountant. If the Sec18 retary, in his discretion, determines that it would contrib19 ute to the financial safety and soundness of the Corpora20 tion and would not impose an undue expense or adminis21 trative burden on it, he may also require the Corporation

22 to include in the report additional financial statements

23 prepared on a market-value basis, including the Corpora24 tion’s market-value net worth.
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1 (d) ASSESSMENTS TO COVER COSTS.—The Secretary

2 shall assess the Corporation for the cost to the Secretary

3 of any regulatory activities conducted under this section,

4 including the cost of any examination.

5 SEC. 14. SECURITIES.

6 (a) FEDERAL LAWS.—

7 (1) APPLICABILITY OF CERTAIN FEDERAL SE8 CURITIES LAWS.—For purposes of section 3(a)(2) of

9 the Securities Act of 1933, no security issued by the

10 Corporation nor qualified loan nor security rep11 resenting an interest in a pool of qualified loans for

12 which guarantees have been provided by the Cor13 poration shall be deemed to be a security issued or

14 guaranteed by a person controlled or supervised by,

15 or acting as an instrumentality of, the Government

16 of the United States. No such security shall be

17 deemed to be a ‘‘government security’’ for purposes

18 of the Securities Exchange Act of 1934 or for pur19 poses of the Investment Company Act of 1940.

20 (2) NO FULL FAITH AND CREDIT OF THE UNIT21 ED STATES.—Each loan or security for which credit

22 enhancement has been provided by the Corporation

23 and each security issued by the Corporation shall

24 clearly indicate that it is not an obligation of, and

25 is not guaranteed as to principal or interest by the
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1 United States, or any other agency or instrumental2 ity of the United States (other than the Venture En3 hancement and Loan Development Administration

4 for Smaller Undercapitalized Enterprises).

5 (b) STATE SECURITIES LAWS.—

6 (1) GENERAL EXEMPTION.—Any security is7 sued by the Corporation and any qualified loan, se8 curity or obligation that has been provided a guaran9 tee by the Corporation shall be exempt from any law

10 of any State with respect to or requiring registration

11 or qualification of securities or real estate to the

12 same extent as any obligation issued by, or guaran13 teed as to principal and interest by, the United

14 States or any other agency or instrumentality of the

15 United States.

16 (2) STATE OVERRIDE.—The provisions of para17 graph (1) shall not be applicable to any State that,

18 during the 5-year period beginning on the effective

19 date of this Act, enacts a law that—

20 (A) specifically refers to this subsection;

21 and

22 (B) expressly provides that paragraph (1)

23 shall not apply to the State.

24 (c) AUTHORIZED INVESTMENTS.—
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1 (1) IN GENERAL.—Securities issued by the Cor2 poration and qualified loans, or securities represent3 ing an interest in, or obligations backed by, pools of

4 qualified loans with respect to which the Corporation

5 has provided a guarantee shall be authorized invest6 ments of any person, trust corporation, partnership,

7 association, business trust, or business entity created

8 pursuant to or existing under the laws of the United

9 States or any State to the same extent that the per10 son, trust, corporation, partnership, association,

11 business trust, or business entity is authorized under

12 any applicable law to purchase, hold, or invest in ob13 ligations issued by or guaranteed as to principal and

14 interest by the United States or any agency or in15 strumentality of the United States. Such loans, secu16 rities or obligations may be accepted as security for

17 all fiduciary, trust, and public funds, the investment

18 or deposits of which shall be under the authority and

19 control of the United States or any State or any of20 ficers of either.

21 (2) STATE LIMITATIONS ON PURCHASE, HOLD22 ING, OR INVESTMENT.—If State law limits the pur23 chase, holding, or investment in obligations issued

24 by the United States by the person, trust, corpora25 tion, partnership, association, business trust, or
40

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1 business entity, then qualified loans, or securities or

2 obligations of a certified pooler on which the Cor3 poration has provided a guarantee shall be consid4 ered to be obligations issued by the United States

5 for purposes of the limitation.

6 (3) NONAPPLICABILITY OF PROVISIONS.—

7 (A) SUBSEQUENT STATE LAW.—Para8 graphs (1) and (2) shall not apply with respect

9 to a particular person, trust, corporation, part10 nership, association, business trust, or business

11 entity, or class thereof, in any State that, prior

12 to the expiration of the five year period begin13 ning on the date of the enactment of this Act,

14 enacts a law that specifically refers to this sec15 tion and either prohibits or provides for a more

16 limited authority to purchase, hold, or invest in

17 the qualified loans or securities by any person,

18 trust, corporation, partnership, association,

19 business trust, or business entity, or class

20 thereof, than is provided in paragraphs (1) and

21 (2).

22 (B) EFFECT OF SUBSEQUENT STATE

23 LAW.—The enactment by any State of a law of

24 the type described in subparagraph (A) shall

25 not affect the validity of any contractual com-
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1 mitment to purchase, hold, or invest that was

2 made prior to the effective date of the law and

3 shall not require the sale or other disposition of

4 any loans or securities acquired prior to the ef5 fective date of the law.

6 (d) STATE USURY LAWS SUPERSEDED.—Any provi7 sion of the constitution or law of any State which expressly

8 limits the rate or amount of interest, discount points, fi9 nance charges, or other charges that may be charged,

10 taken, received, or reserved by the Corporation, origina11 tors or certified poolers shall not apply to any qualified

12 loan made by an originator or to security issued by the

13 Corporation or a certified pooler in accordance with this

14 Act.

15 SEC. 15. AUTHORITY TO ISSUE OBLIGATIONS TO COVER

16 LOSSES OF CORPORATION.

17 (a) SALE OF OBLIGATIONS TO TREASURY.—

18 (1) IN GENERAL.—Subject to the limitations

19 contained in section 12(c) and the requirement of

20 paragraph (2), the Corporation may issue obliga21 tions to the Secretary of the Treasury, the proceeds

22 of which may be used by the Corporation solely for

23 the purpose of fulfilling the obligations of the Cor24 poration under any security issued by the Corpora-
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1 tion or guarantee provided by the Corporation under

2 this Act.

3 (2) CERTIFICATION.—The Secretary of the

4 Treasury may purchase obligations of the Corpora5 tion under paragraph (1) only if the Corporation

6 certifies to the Secretary that—

7 (A) the requirements of section 12(c) have

8 been fulfilled; and

9 (B) the proceeds of the sale of such obliga10 tions are needed to fulfill the obligations of the

11 Corporation under any guarantee provided by

12 or security issued by the Corporation under this

13 Act.

14 (b) LIMITATION OF AMOUNT OF OUTSTANDING OB15 LIGATIONS.—The aggregate amount of obligations issued

16 by the Corporation under subsection (a)(1) which may be

17 held by the Secretary of the Treasury at any time (as de18 termined by the Secretary) shall not exceed

19 $1,500,000,000.

20 (c) TERMS OF OBLIGATION.—

21 (1) INTEREST.—Each obligation purchased by

22 the Secretary of the Treasury shall bear interest at

23 a rate determined by the Secretary, taking into con24 sideration the average rate on outstanding market25 able obligations of the United States as of the last
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1 day of the last calendar month ending before the

2 date of the purchase of such obligation.

3 (2) REDEMPTION.—The Secretary of the Treas4 ury shall require that such obligations be

5 repurchased by the Corporation within a reasonable

6 time.

7 (d) COORDINATION WITH TITLE 31, UNITED STATES

8 CODE.—

9 (1) AUTHORITY TO USE PROCEEDS FROM SALE

10 OF TREASURY SECURITIES.—For the purpose of pur11 chasing obligations of the Corporation, the Secretary

12 of the Treasury may use as a public debt transaction

13 the proceeds from the sale by the Secretary of any

14 securities issued under chapter 31 of title 31, United

15 States Code, and the purposes for which securities

16 may be issued under such chapter are extended to

17 include such purchases.

18 (2) TREATMENT OF TRANSACTIONS.—All pur19 chases and sales by the Secretary of the Treasury of

20 obligations issued by the Corporation under this sec21 tion shall be treated as public debt transactions of

22 the United States.

23 (e) AUTHORIZATION OF APPROPRIATIONS.—There is

24 authorized to be appropriated to the Secretary of the
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1 Treasury $1,500,000,000, without fiscal year limitation,

2 to carry out the purposes of this Act.

3 SEC. 16. FEDERAL JURISDICTION.

4 (a) Notwithstanding section 1349 of title 28, United

5 States Code, or any other provision of law:

6 (1) The Corporation shall be considered an

7 agency under sections 1345 and 1442 of such title.

8 (2) All civil actions to which the Corporation is

9 a party shall be deemed to arise under the laws of

10 the United States and, to the extent applicable, shall

11 be deemed to be governed by Federal common law.

12 The district courts of the United States shall have

13 original jurisdiction of all such actions, without re14 gard to the amount of value.

15 (3) Any civil or other action, case, or con16 troversy in a court of a State or any court, other

17 than a district court of the United States, to which

18 the Corporation is a party may at any time before

19 trial be removed by the Corporation, without the giv20 ing of any bond or security—

21 (A) to the district court of the United

22 States for the district and division embracing

23 the place where the same is pending; or

24 (B) if there is no such district court, to the

25 district court of the United States for the dis-
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1 trict in which the principal office of the Cor2 poration is located;

3 by following any procedure for removal for causes in

4 effect at the time of such removal.

5 (4) No attachment or execution shall be issued

6 against the Corporation or any of the property of

7 the Corporation before final judgment in any Fed8 eral, State, or other court.

9 (b) NATURE OF CORPORATION.—The Corporation

10 shall, for the purposes of section 14(b)(2) of the Federal

11 Reserve Act (12 U.S.C. 355), be deemed to be an agency

12 of the United States. The obligations of the Corporation

13 shall be deemed to be obligations of the United States for

14 purposes of section 3124 of title 31, United States Code.

15 For the purpose of section 101(41) of title 11, United

16 States Code, the Corporation shall be deemed to be an

17 agency of the United States; however, for the purpose of

18 section 101(35) of title 11, United States Code, the Cor19 poration shall not be deemed to be a governmental unit,

20 but instead shall be deemed to be a corporation.

21 (c) FRAUD BY CORPORATE OFFICER.—Section 1006

22 of title 18, United States Code, is amended by inserting

23 before ‘‘or any Small Business Investment Company,’’ the

24 following: ‘‘or the Venture Enhancement and Loan Devel-
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1 opment Administration for Smaller Undercapitalized En2 terprises,’’.

3 (d) BANKING AUTHORITY.—The sixth sentence of the

4 seventh paragraph of section 5136 of the Revised Statutes

5 of the United States (12 U.S.C. 24) is amended by insert6 ing after ‘‘Student Loan Marketing Association,’’ the fol7 lowing ‘‘or obligations or other instruments or securities

8 of the Venture Enhancement and Loan Development Ad9 ministration for Smaller Undercapitalized Enterprises,’’.

10 SEC. 17. GAO AUDIT OF CORPORATION.

11 (a) AUDITS AUTHORIZED.—Notwithstanding any

12 other provision of law and under such regulations as the

13 Comptroller General may prescribe, the Comptroller Gen14 eral shall perform a financial audit of the Corporation on

15 whatever basis the Comptroller General determines to be

16 necessary.

17 (b) COOPERATION OF CORPORATION REQUIRED.—

18 The Corporation shall—

19 (1) make available to the Comptroller General

20 for audit all records and property of, or used or

21 managed by, the Corporation which may be nec22 essary for the audit; and

23 (2) provide the Comptroller General with facili24 ties for verifying transactions with the balances of
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1 securities held by any depositary, fiscal agent, or

2 custodian.

3 SEC. 18. FEDERAL FUNDING.

4 (a) INTERIM TEMPORARY ADVANCES.—After the

5 Corporation has sold the minimum amount of common

6 stock as provided in section 10(b)(1), the Secretary of the

7 Treasury shall purchase obligations of the Corporation in

8 such sums, and at such times, as the Corporation may

9 request, but not to exceed $300,000,000. The proceeds

10 shall be deemed to be capital of the Corporation for pur11 poses of section 7(b)(1).

12 (1) TERM AND INTEREST.—The obligations

13 shall be repayable over a term of ten years com14 mencing fifteen years after the date of the purchase

15 by the Secretary. Repayments shall be amortized

16 and the obligations shall bear interest at a rate de17 termined by the Secretary, taking into consideration

18 the current average market yield on outstanding

19 marketable obligations of the United States with fif20 teen years maturities, adjusted to the nearest one21 eighth of 1 per centum. During the first five years

22 of each obligation, interest payments shall be limited

23 annually not to exceed the retained earnings of the

24 corporation after all other expenses except such in25 terest payments have been made.
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1 (2) PREPAYMENTS.—The Corporation may pre2 pay the obligations at any time without the payment

3 of any type of prepayment penalty.

4 (b) WARRANTS.—Upon the purchase of obligations

5 pursuant to subsection (a), the Corporation shall issue

6 warrants to the Secretary of the Treasury for the purchase

7 of non-voting common stock in the Corporation. If the

8 warrants are exercised by the Secretary, the stock so ac9 quired shall be non-voting as long as it is held by the Sec10 retary. The warrants shall be freely transferable and if

11 exercised by any person in any capacity other than as an

12 employee or officer of the Federal government, stock so

13 acquired shall be with full voting rights.

14 (1) AMOUNT.—The exercise price of the war15 rants shall be the average price at which voting com16 mon stock of the Corporation, was sold during the

17 year preceding issuance of the warrants, plus 10 per

18 centum. The Secretary shall receive warrants in such

19 amounts as will enable the Secretary to purchase

20 one dollar in common stock for each ten dollars of

21 obligations purchased under subsection (a).

22 (2) DURATION.—The warrants shall be exer23 cisable at any time by the Secretary for a period of

24 15 years from the date of issuance.
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1 (c) AUTHORIZATION.—In addition to the amounts

2 authorized in section 15(e), there are authorized to be ap3 propriated to the Secretary of Treasury, $300,000,000

4 without fiscal year limitation, to carry out the provisions

5 of this section.

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