Calendar No. 259

103D CONGRESS

1ST SESSION S. 1275

[Report No. 103–169]

A BILL

To facilitate the establishment of community

development financial institutions.

OCTOBER 28 (legislative day, OCTOBER 13), 1993

Reported with an amendment and an amendment to the

title
II

Calendar No. 259

103D CONGRESS

1ST SESSION S. 1275

[Report No. 103–169]

To facilitate the establishment of community development financial

institutions.

IN THE SENATE OF THE UNITED STATES

JULY 21 (legislative day, JUNE 30), 1993

Mr. RIEGLE (for himself, Mr. SARBANES, Mr. DODD, Mr. KERRY, Mrs.

BOXER, Mr. CAMPBELL, Ms. MOSELEY-BRAUN, Mr. BRADLEY, and Mrs.

FEINSTEIN) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

OCTOBER 28 (legislative day, OCTOBER 13), 1993

Reported by Mr. RIEGLE, with an amendment and an amendment to the title

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

A BILL

To facilitate the establishment of community development

financial institutions.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Community Develop5 ment Banking and Financial Institutions Act of 1993’’.
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1 SEC. 2. FINDINGS AND PURPOSE.

2 (a) FINDINGS.—The Congress finds that—

3 (1) many of the Nation’s urban and rural com4 munities and Indian reservations face critical social

5 and economic problems arising in part from the lack

6 of economic growth, people living in poverty, and the

7 lack of employment and other opportunities;

8 (2) the restoration and maintenance of the

9 economies of these communities will require coordi10 nated development strategies, intensive supportive

11 services, and increased access to capital and credit

12 for development activities, including investment in

13 businesses, housing, commercial real estate, human

14 development, and other activities that promote the

15 long-term economic and social viability of the com16 munity;

17 (3) in many urban and rural communities, low18 and moderate-income neighborhoods, and Indian res19 ervations, there is a shortage of capital and credit

20 for business and affordable housing;

21 (4) access to capital and credit is essential to

22 unleash the untapped entrepreneurial energy of

23 America’s poorest communities and to empower indi24 viduals and communities to become self-sufficient;

25 and
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1 (5) community development financial institu2 tions have proven their ability to identify and re3 spond to community needs for capital, credit, and

4 development services in the absence of, or as a com5 plement to, services provided by other lenders.

6 (b) PURPOSE.—The purpose of this Act is to create

7 a Community Development Banking and Financial Insti8 tutions Fund that will support a program of investment

9 in and assistance to community development financial in10 stitutions. The Community Development Banking and Fi11 nancial Institutions Fund will provide financial and tech12 nical assistance, including training, to community develop13 ment financial institutions, serve as a national information

14 clearinghouse, and be an institutional voice for community

15 development. The community development financial insti16 tutions that the Community Development Banking and

17 Financial Institutions Fund supports will provide capital,

18 credit, and development services to targeted investment

19 areas or populations, and will promote economic revitaliza20 tion and community development.

21 SEC. 3. DEFINITIONS.

22 (a) APPROPRIATE FEDERAL BANKING AGENCY.—

23 The term ‘‘appropriate Federal banking agency’’ has the

24 same meaning given such term in section 3(q) of the Fed25 eral Deposit Insurance Act (12 U.S.C. 1813(q)).
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1 (b) COMMUNITY DEVELOPMENT FINANCIAL INSTI2 TUTION.—The term ‘‘community development financial in3 stitution’’ means any bank, savings association, depository

4 institution holding company, credit union, micro-enter5 prise loan fund, community development corporation, com6 munity development revolving loan fund, minority-owned

7 or other insured depository institution, or non-depository

8 organization that—

9 (1) has as its primary mission the promotion of

10 community development through the provision of

11 capital, credit, or development services in its invest12 ment areas or to targeted populations; and

13 (2) encourages, through representation on its

14 governing board or otherwise, the input of residents

15 in the investment area or the targeted populations.

16 A depository institution holding company may qualify as

17 a community development financial institution only if the

18 holding company and its subsidiaries collectively satisfy

19 the requirements of paragraphs (1) and (2). No subsidiary

20 of a depository institution holding company may qualify

21 as a community development financial institution if the

22 holding company and its subsidiaries collectively do not

23 meet the requirements of paragraphs (1) and (2). The

24 term ‘‘community development financial institution’’ does

25 not include an agency or instrumentality of the United
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1 States or an agency or instrumentallity of any State or

2 political subdivision thereof.

3 (c) DEPOSITORY INSTITUTION HOLDING COM4 PANY.—The term ‘‘depostitory institution holding com5 pany’’ has the same meaning given such term in section

6 3(w) of the Federal Deposit Insurance Act (12 U.S.C.

7 1813(w)).

8 (d) DEVELOPMENT SERVICES.—The term ‘‘develop9 ment services’’ means activities conducted by a community

10 development financial institution that promote community

11 development by developing, supporting, and strengthening

12 the lending, investment, and capacity-building activities

13 undertaken by institutions, including, but not limited to—

14 (1) business planning services;

15 (2) financial and credit counseling services;

16 (3) marketing and management assistance; and

17 (4) administrative activities associated with

18 lending or investment.

19 (e) INSURED COMMUNITY DEVELOPMENT FINANCIAL

20 INSTITUTION.—The term ‘‘insured community develop21 ment financial institution’’ means any community develop22 ment financial institution that is an insured depository in23 stitution. The term also includes an insured credit union

24 which has been designated as low-income by the National

25 Credit Union Administration.
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1 (f) INSURED CREDIT UNION.—The term ‘‘insured

2 credit union’’ has the same meaning given such term in

3 section 101(7) of the Federal Credit Union Act (12 U.S.C.

4 1752(7)).

5 (g) INSURED DEPOSITORY INSTITUTION.—The term

6 ‘‘insured depository institution’’ has the same meaning

7 given such term in section 3(c) of the Federal Deposit In8 surance Act (12 U.S.C. 1813(c)).

9 (h) INVESTMENT AREA.—The term ‘‘investment

10 area’’ means an identifiable community that—

11 (1) meets objective criteria of distress, including

12 the number of low-income families, the extent of

13 poverty, the extent of unemployment, the extent of

14 unmet credit needs, the degree of availability of

15 basic financial services, the degree of limited access

16 to capital and credit provided by existing financial

17 institutions, and other factors that the Fund deter18 mines to be appropriate; or

19 (2) is located in an empowerment zone or enter20 prise community designated under section 1391 of

21 the Internal Revenue Code of 1986.

22 (i) QUALIFIED COMMUNITY DEVELOPMENT FINAN23 CIAL INSTITUTION.—The term ‘‘qualified community de24 velopment financial institution’’ means a community devel-
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1 opment financial institution that meets the requirements

2 of sections 5(b) (2) through (8) of this Act.

3 (j) TARGETED POPULATION.—The term ‘‘targeted

4 population’’ means an identifiable group of low-income or

5 disadvantaged persons that are underserved by existing fi6 nancial institutions.

7 SEC. 4. ESTABLISHMENT OF NATIONAL FUND FOR COMMU8 NITY DEVELOPMENT BANKING.

9 (a) IN GENERAL.—There is created and chartered a

10 body corporate to be known as the Community Develop11 ment Banking and Financial Institutions Fund (referred

12 to in this Act as the ‘‘Fund’’) that shall have the powers

13 and responsibilities specified by this Act. The Fund shall

14 have succession until dissolved. The charter of the Fund

15 may be revised, amended, or modified by Congress at any

16 time. The offices of the Fund shall be in Washington, D.C.

17 (b) BOARD OF DIRECTORS.—

18 (1) IN GENERAL.—The powers and manage19 ment of the Fund shall be vested in a Board of Di20 rectors (referred to in this Act as the ‘‘Board’’),

21 which shall have nine members.

22 (2) MEMBERS.—The members of the Board

23 shall consist of the following:

24 (A) The Secretary of Agriculture.

25 (B) The Secretary of Commerce.
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1 (C) The Secretary of Housing and Urban

2 Development.

3 (D) The Secretary of the Treasury.

4 (E) The Administrator of the Small Busi5 ness Administration.

6 (F) Four private citizens, appointed by the

7 President with the advice and consent of the

8 Senate, that collectively—

9 (i) represent community groups whose

10 constituencies include low-income persons

11 or residents of investment areas,

12 (ii) have expertise in the operations

13 and activities of insured depository institu14 tions, and

15 (iii) have expertise in community de16 velopment and lending;

17 provided that there should not be less than one

18 member from each of the three categories de19 scribed in clauses (i) through (iii) of this sub20 paragraph.

21 (3) CHAIRPERSON.—The President shall ap22 point from among the members of the Board speci23 fied in paragraph (2)(F) a chairperson of the Board,

24 who shall serve at the pleasure of the President for

25 a term of two years.
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1 (4) VICE-CHAIRPERSON.—The President shall

2 appoint from among the members specified in para3 graph (2) a vice-chairperson who will serve as chair4 person in the absence, disability, or recusal of the

5 chairperson. The vice-chairperson shall serve at the

6 pleasure of the President for a term of two years.

7 (5) TERMS OF APPOINTED MEMBERS.—

8 (A) IN GENERAL.—Each member ap9 pointed pursuant to paragraph (2)(F) shall

10 serve at the pleasure of the President for a

11 term of four years, except as provided in para12 graph (5)(C).

13 (B) VACANCIES.—Any member appointed

14 to fill a vacancy occurring prior to the expira15 tion of the term for which the previous member

16 was appointed shall be appointed for the re17 mainder of such term. Appointed members may

18 continue to serve following the expiration of

19 their terms until a successor is appointed and

20 qualified.

21 (C) TERMS.—The terms of the initial ap22 pointed members shall be for four years and

23 shall begin on the date each member is ap24 pointed, except that two of the members ini25 tially appointed pursuant to paragraph (2)(F)
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1 shall be designated to serve at the pleasure of

2 the President for five years.

3 (6) ACTING OFFICIALS.—In the event of a va4 cancy or absence of the individual in any of the of5 fices described in paragraphs (2) (A) through (E),

6 the official acting in that office shall be a member

7 of the Board.

8 (7) AUTHORITY TO DELEGATE.—Each member

9 of the Board specified in paragraphs (2) (A)

10 through (E) may designate another official who has

11 been appointed by the President with the advice and

12 consent of the Senate within the same agency to

13 serve as a member in his or her stead.

14 (8) COMPENSATION.—Members of the Board

15 who are otherwise officers or employees of the Unit16 ed States shall serve without additional compensa17 tion for their duties as members, but shall be reim18 bursed by the Fund for travel, per diem, and other

19 necessary expenses incurred in the performance of

20 their duties, in accordance with sections 5702 and

21 5703 of title 5, United States Code. The appointed

22 members of the Board shall be entitled to receive

23 compensation at the daily equivalent of the rate for

24 a position under Level IV of the Executive Schedule

25 under section 5315 of title 5, United States Code,
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1 and shall be reimbursed by the Fund for travel, per

2 diem, and other necessary expenses incurred in the

3 performance of their duties, in accordance with sec4 tions 5702 and 5703 of title 5, United States Code.

5 (9) MEETINGS.—The Board shall hold meetings

6 at least quarterly. Special meetings of the Board

7 may be called by the Chairperson or on the written

8 request of three members of the Board. A majority

9 of the members of the Board in office shall con10 stitute a quorum.

11 (c) OFFICERS AND EMPLOYEES.—The Board shall

12 appoint a Chief Executive Officer who will be responsible

13 for the management of the Fund and such other duties

14 deemed appropriate by the Board. The Board shall ap15 point a Chief Financial Officer who shall oversee all of

16 the financial management activities of the Fund. The

17 Board shall also appoint an Inspector General. The Board

18 may appoint such other officers and employees of the

19 Fund as the Board determines to be necessary or appro20 priate. The Chief Executive Officer, Chief Financial Offi21 cer, and up to 3 other officers of the Fund may be ap22 pointed without regard to the provisions of title 5 of the

23 United States Code governing appointments in the Fed24 eral service and compensated without regard to chapter

25 51 and subchapter III of chapter 53 of title 5 of the Unit-
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1 ed States Code, except that the rate of pay for the Chief

2 Executive Officer shall not exceed the rate for a position

3 under Level II of the Executive Schedule under section

4 5313 of title 5 of the United States Code and the rate

5 of pay for the remaining four officers shall not exceed the

6 rate for a position under Level IV of the Executive Sched7 ule under section 5315 of title 5 of the United States

8 Code.

9 (d) GENERAL POWERS.—In carrying out its powers

10 and duties, the Fund—

11 (1) shall have all necessary and proper powers

12 to carry out its authority under this Act;

13 (2) may adopt, alter, and use a corporate seal,

14 which shall be judicially noticed;

15 (3) may sue and be sued in its corporate name

16 and complain and defend in any court of competent

17 jurisdiction;

18 (4) may adopt, amend, and repeal bylaws, rules,

19 and regulations governing the manner in which its

20 business may be conducted and shall have power to

21 make such rules and regulations as may be nec22 essary or appropriate to implement the provisions of

23 this Act;

24 (5) may enter into and perform such agree25 ments, contracts, and transactions as may be
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1 deemed necessary or appropriate to the conduct of

2 activities authorized under this Act;

3 (6) may determine the character of and neces4 sity for its expenditures and the manner in which

5 they shall be incurred, allowed, and paid;

6 (7) may utilize or employ the services of person7 nel of any agency or instrumentality of the United

8 States with the consent of the agency or instrumen9 tality concerned on a reimbursable or non reimburs10 able basis; and

11 (8) may execute all instruments necessary or

12 appropriate in the exercise of any of its functions

13 under this Act and may delegate to members of the

14 Board, the Chief Executive Officer, or the officers of

15 the Fund such of its powers and responsibilities as

16 it deems necessary or appropriate for the adminis17 tration of the Fund.

18 (e) WHOLLY-OWNED GOVERNMENT CORPORA19 TION.—

20 (1) The Fund shall be a wholly-owned Govern21 ment corporation in the Executive branch and shall

22 be treated in all respects as an agency of the United

23 States, except to the extent this Act provides other24 wise.
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1 (2) Section 9101(3) of title 31, United States

2 Code (the Government Corporation Control Act), is

3 amended—

4 (A) by redesignating paragraphs (B)

5 through (M) as paragraphs (C) through (N),

6 respectively; and

7 (B) by inserting after paragraph (A) the

8 following:

9 ‘‘(B) the Community Development Banking and

10 Financial Institutions Fund.’’; and

11 (3) Section 9107(b) of title 31, United States

12 Code (the Government Corporation Control Act),

13 shall not apply to deposits of the Fund made pursu14 ant to section 7 of this Act.

15 (f) LIMITATION OF FUND AND FEDERAL LIABIL16 ITY.—The liability of the Fund and of the United States

17 Government arising out of any investment in a community

18 development financial institution in accordance with this

19 Act shall be limited to the amount of the investment and

20 the Fund shall be exempt from any assessments and other

21 liabilities that may be imposed on controlling or principal

22 shareholders by any Federal law or the law of any State,

23 territory, or the District of Columbia. A community devel24 opment financial institution that receives assistance pur-
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1 suant to this Act shall not be deemed to be an agency,

2 department, or instrumentality of the United States.

3 (g) PROHIBITION ON ISSUANCE OF SECURITIES.—

4 The Fund may not issue stock, bonds, debentures, notes,

5 or other securities.

6 SEC. 5. APPLICATIONS FOR ASSISTANCE.

7 (a) FORM AND PROCEDURES.—An application for as8 sistance under this Act shall be submitted by an applicant

9 in such form and in accordance with such procedures as

10 the Board shall establish. The Board shall publish regula11 tions with respect to application requirements and proce12 dures not later than 210 days after enactment of this Act.

13 (b) MINIMUM REQUIREMENTS.—The Board shall re14 quire that the application—

15 (1) demonstrate to the satisfaction of the Board

16 that the applicant is, or upon the receipt of a char17 ter will be, a community development financial insti18 tution as defined in section 3(a) of this Act;

19 (2) demonstrate that the applicant will serve—

20 (A) a targeted population; or

21 (B) an area which is an investment area;

22 (3) in the case of an applicant that has pre23 viously received assistance under this Act, dem24 onstrate that the applicant—
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1 (A) has successfully carried out its respon2 sibilities under this Act;

3 (B) has become or is about to become an

4 entity that will not be dependent upon assist5 ance from the Fund for continued viability; and

6 (C) will expand its operations into a new

7 investment area, offer new services, or will in8 crease the volume of its current business;

9 (4) in the case of a community development fi10 nancial institution with existing operations, dem11 onstrate a record of success of serving investment

12 areas or targeted populations;

13 (5) include a detailed and comprehensive strate14 gic plan for the organization that contains—

15 (A) a business plan of at least five years

16 that demonstrates the applicant is properly

17 managed and has the capacity to form and op18 erate a community development financial insti19 tution that is, or will become, an entity that will

20 not be dependent upon assistance from the

21 Fund for continued viability;

22 (B) a statement that the applicant has, or

23 will have, in its charter or other governing doc24 uments a primary commitment to community

25 development, or other evidence of a prior his-
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1 tory and a continuing affirmation of a primary

2 commitment of community development;

3 (C) an analysis of the needs of the invest4 ment area or targeted populations and a strat5 egy for how the applicant will attempt to meet

6 those needs;

7 (D) a plan to coordinate use of assistance

8 from the Fund with existing Federal, govern9 ment-sponsored enterprise, and State and local

10 assistance programs, and private sector finan11 cial services;

12 (E) a statement that the proposed activi13 ties of the applicant are consistent with existing

14 economic, community and housing development

15 plans adopted by or applicable to the invest16 ment area;

17 (F) a description of how the applicant will

18 affiliate, network, or otherwise coordinate with

19 a full range of community organizations and fi20 nancial institutions which provide, or will pro21 vide, capital, credit, or secondary markets in

22 order to assure that banking, economic develop23 ment, investment, affordable housing, and other

24 related services will be available within the in25 vestment area or to targeted populations; and
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1 (G) such other information as the Board

2 deems appropriate for inclusion in the strategic

3 plan;

4 (6) demonstrate that the applicant will carry on

5 its activities consistent with the purposes of this Act

6 within the investment area or with respect to a tar7 geted population;

8 (7) include a detailed and specific statement of

9 applicant’s plans and likely sources of funds to

10 match the amount of assistance from the Fund with

11 funds from private sources in accordance with the

12 requirements of section 7(d) of this Act; and

13 (8) include such other information as the Board

14 may require.

15 (c) PRE-APPLICATION OUTREACH PROGRAM.—The

16 Fund shall provide for an outreach program to identify

17 and provide information to potential applicants and to in18 crease the capacity of potential applicants to meet the ap19 plication and other requirements of this Act.

20 SEC. 6. SELECTION OF INSTITUTIONS.

21 (a) SELECTION CRITERIA.—The Board shall, in its

22 discretion, select applications that meet the requirements

23 of section 5 of this Act and award assistance from the

24 Fund in accordance with section 7 of this Act. In selecting
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1 applications, the Board shall consider applications based

2 on, but not limited to—

3 (1) the likelihood of success of the applicant in

4 forming and operating a community development fi5 nancial institution;

6 (2) the range and comprehensiveness of the

7 capital, credit, and development services to be pro8 vided by the applicant;

9 (3) the extent of the need, as measured by ob10 jective criteria of distress, within the investment

11 areas or targeted populations for the types of activi12 ties proposed by the applicant;

13 (4) the likelihood that the proposed activities

14 will benefit a significant portion of the investment

15 areas or targeted populations or, in the case of a

16 community development financial institution with ex17 isting operations, evidence of a record of success in

18 serving investment areas or targeted populations;

19 (5) the extent to which the applicant will con20 centrate its activities on serving low and very low21 income families;

22 (6) the evidence of the extent of a broad cross23 section of support from the investment areas or tar24 geted populations;
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1 (7) the experience and background of the pro2 posed management team;

3 (8) the amount of legally enforceable commit4 ments available at the time of application to meet or

5 exceed the matching requirements under section 7(d)

6 of this Act and the strength of the plan for raising

7 the balance of the match;

8 (9) in the case of applicants that have pre9 viously received assistance pursuant to this Act, the

10 extent to which they have met or exceeded their per11 formance goals;

12 (10) the extent to which the proposed activities

13 will expand the employment base within the invest14 ment areas or the targeted populations;

15 (11) the extent to which the applicant is, or will

16 be, community-owned or community-governed;

17 (12) whether the applicant is, or will become,

18 an insured community development financial institu19 tion;

20 (13) whether the applicant is, or will be located,

21 in an empowerment zone or enterprise community

22 designated under section 1391 of the Internal Reve23 nue Code of 1986;

24 (14) in the case of an institution that is not an

25 insured community development financial institution,
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1 the extent to which the institution has or will have

2 the ability to increase its resources through affili3 ation with a secondary market, insured depository

4 institution, or other financial intermediary in order

5 to multiply the amount of capital or credit available

6 for community development;

7 (15) in the case of an insured depository insti8 tution or insured credit union applicant, whether the

9 institution—

10 (A) has or will have a substantial affili11 ation with an entity or network of entities that

12 are community development financial institu13 tions; and

14 (B) has a comprehensive plan for providing

15 meaningful financial assistance to such an en16 tity or network of entities; and

17 (16) other factors deemed appropriate by the

18 Board.

19 (b) GEOGRAPHIC DIVERSITY.—In addition to the

20 above, in making its selections, the Board shall seek to

21 fund a geographically diverse group of applicants, which

22 shall include applicants from nonmetropolitan and rural

23 areas.

24 (c) PUBLICATION REQUIREMENT.—The Board shall

25 publish regulations with respect to its selection criteria not
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1 later than 210 days after the date of enactment of this

2 Act.

3 SEC. 7. ASSISTANCE PROVIDED BY THE FUND.

4 (a) PURPOSE OF ASSISTANCE.—

5 (1) The Fund shall work to promote an envi6 ronment hospitable to business formation, economic

7 growth, community development, and affordable

8 housing in distressed communities. The Fund shall

9 coordinate its activities with existing Federal and

10 other community and economic development pro11 grams.

12 (2) Assistance may be provided to an existing

13 qualified community development financial institu14 tion to expand its activities to serve investment

15 areas or targeted populations not currently served by

16 another qualified community development financial

17 institution receiving assistance under this section or

18 to expand the volume of its activities consistent with

19 the purposes of this Act, or to form a new entity to

20 undertake activities consistent with the purposes of

21 this Act, or to assist an existing entity to modify its

22 structure or activities in order to undertake activi23 ties consistent with the purposes of this Act.

24 (b) TYPES OF ASSISTANCE.—
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1 (1) IN GENERAL.—The Fund may provide fi2 nancial assistance to qualified community develop3 ment financial institutions through equity invest4 ments, loans, deposits, membership shares, and

5 grants. The Fund may also provide technical assist6 ance, including training, and grants for technical as7 sistance to qualified community development finan8 cial institutions. The allocation of awards of assist9 ance between insured and uninsured community de10 velopment financial institutions shall be in the dis11 cretion of the Board, provided that due consider12 ation shall be given to the allocation of funds to in13 sured community development financial institutions.

14 (2) FINANCIAL ASSISTANCE.—The fund shall

15 structure financial assistance to a qualified commu16 nity development financial institution in such a man17 ner that it does not own more than 50 percent of

18 the equity of such institution and does not control

19 the operations of such institution. The Fund will not

20 be deemed to control such institution for the pur21 poses of applicable laws. With respect to equity in22 vestments, the Fund shall hold only transferable,

23 nonvoting investments. Such equity investments may

24 provide for convertibility to voting stock upon trans25 fer by the Fund.
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1 (3) DEPOSITS.—Notwithstanding any other

2 provision of law, deposits made pursuant to this sec3 tion in qualified insured community development fi4 nancial institutions shall not be subject to any re5 quirement for collateral or security.

6 (4) LIMITATIONS ON OBLIGATIONS.—Direct

7 loan obligations may be incurred only to the extent

8 that appropriations of budget authority to cover

9 their costs, as defined in section 502 of the Congres10 sional Budget Act of 1974, are made in advance.

11 (c) PURPOSE OF FINANCIAL ASSISTANCE.—Financial

12 assistance made available under this Act may be used by

13 assisted institutions to develop or support—

14 (1) commercial facilities that enhance revitaliza15 tion, community stability, or job creation and reten16 tion efforts;

17 (2) business creation and expansion efforts

18 that—

19 (A) create or retain jobs for low-income

20 people;

21 (B) enhance the availability of products

22 and services to low-income people; or

23 (C) create or retain businesses owned by

24 low-income people or residents of a targeted

25 area;
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1 (3) community facilities that provide benefits to

2 low-income people or enhance community stability;

3 (4) the provision of basic financial services to

4 low-income people or residents of a targeted area;

5 (5) the provision of development services;

6 (6) home ownership opportunities that are af7 fordable to low-income households;

8 (7) rental housing that is principally affordable

9 to low-income households; and

10 (8) other activities deemed appropriate by the

11 Fund.

12 (d) AMOUNT OF ASSISTANCE.—The Fund may pro13 vide up to $5,000,000 of assistance per application to any

14 one qualified insured community development financial in15 stitution and up to $2,000,000 per application to any

16 other qualified community development financial institu17 tion. The Fund shall have the authority to set minimum

18 amounts of assistance per institution.

19 (e) MATCHING REQUIREMENTS.—

20 (1) Assistance provided to qualified insured

21 community development financial institutions, other

22 than deposits or membership shares of $100,000 or

23 less, technical assistance, or grants for technical as24 sistance, shall be matched by no less than one dollar

25 of equity, deposits or membership shares for each
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1 dollar provided by the Fund. The Fund shall require

2 a match for all other assistance, the amount and

3 form of which shall be in the discretion of the Fund;

4 provided that, the Fund shall in no event require as5 sistance provided in the form of deposits or member6 ship shares of $100,000 or less, technical assistance,

7 or grants for technical assistance to be matched.

8 The Fund shall provide no assistance except tech9 nical assistance or grants for technical assistance

10 until a qualified community development financial

11 institution has secured legally enforceable commit12 ments for the entire match required. Assistance may

13 be provided in one lump sum, or over a period of

14 time, as determined by the Fund.

15 (2) Assistance shall be matched with funds

16 from sources other than the Federal Government.

17 (f) TERMS AND CONDITIONS.—

18 (1) IN GENERAL.—The Fund shall provide as19 sistance authorized under this Act in such form and

20 subject to such restrictions as are necessary to en21 sure that to the maximum extent practicable—

22 (A) all assistance granted is used by the

23 qualified community development financial in24 stitution in a manner consistent with the pur25 poses of this Act;
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1 (B) qualified community development fi2 nancial institutions receiving assistance that are

3 not otherwise regulated by the Federal govern4 ment or by a State government are financially

5 and managerially sound;

6 (C) assistance results in a net increase,

7 both nationally and in the local communities in

8 which assistance is provided, in capital, credit,

9 and development services; and

10 (D) assistance is provided in a manner

11 that encourages affiliations and partnerships

12 between insured depository institutions, second13 ary markets or other sources of credit or lever14 age and local organizations dedicated to com15 munity development.

16 (2) CONSULTATION WITH BANKING REGU17 LATORS.—Prior to providing assistance to a quali18 fied insured community development financial insti19 tution, the Board should consult with the appro20 priate Federal banking agency or, in the case of an

21 insured credit union, the National Credit Union Ad22 ministration.

23 (3) ASSISTANCE AGREEMENT.—

24 (A) The Board shall impose restrictions on

25 the use of assistance through a stock purchase
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1 agreement, share purchase agreement, or

2 through a contract entered into in consideration

3 for the provision of assistance.

4 (B) Such agreement or contract shall re5 quire institutions assisted under this Act to

6 comply with performance goals. The perform7 ance goals shall be negotiated between the

8 Board and each qualified community develop9 ment financial institution receiving assistance

10 based upon the strategic plan submitted pursu11 ant to section 5(b)(5) of this Act. The perform12 ance goals may be renegotiated jointly as nec13 essary or appropriate, subject to subparagraph

14 (C) of this section. Activity levels for insured

15 community development financial institutions

16 should be determined by the Board in consulta17 tion with the appropriate Federal banking agen18 cy or, in the case of an insured credit union,

19 with the National Credit Union Administration.

20 (C) The agreement or contract shall speci21 fy sanctions available to the Board, in its dis22 cretion, in the event of noncompliance with the

23 purposes of this Act or the terms of the agree24 ment. The sanctions may include revocation of

25 approval of the application, terminating or re-
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1 ducing future assistance, requiring repayment

2 of assistance, and requiring changes to the per3 formance goals imposed pursuant to subpara4 graph (B) or to the strategic plan submitted

5 pursuant to section 5(b)(5) of this Act. In the

6 case of an insured community development fi7 nancial institution, the Board shall consult with

8 the appropriate Federal banking agency or, in

9 the case of an insured credit union, the Na10 tional Credit Union Administration, before im11 posing sanctions pursuant to this paragraph.

12 (4) REVIEW.—At least annually, the Board

13 shall review the performance of each assisted quali14 fied community development financial institution in

15 carrying out its strategic plan and performance

16 goals.

17 (5) REPORTING.—The Board shall require each

18 qualified community development financial institu19 tion receiving assistance to submit an annual report

20 to the Fund on its activities, its financial condition,

21 its success in meeting performance goals, and its

22 compliance with other requirements of this Act.

23 (g) AUTHORITY TO SELL EQUITY INVESTMENT AND

24 LOANS.—The Board shall have the authority at any time

25 to sell its investments and loans and may, in its discretion,
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1 retain the power to enforce limitations on assistance en2 tered into in accordance with the requirements of this Act.

3 (h) NO AUTHORITY TO LIMIT SUPERVISION AND

4 REGULATION.—Nothing in this Act shall affect any au5 thority of the appropriate Federal banking agency or, in

6 the case of an insured credit union, the National Credit

7 Union Administration, to supervise and regulate an in8 sured community development financial institution.

9 SEC. 8. ENCOURAGEMENT OF PRIVATE ENTITIES.

10 The Board may cause to be incorporated, or encour11 age the incorporation of, private non-profit and for-profit

12 entities that will complement the activities of the Fund

13 in carrying out the purposes of this Act. The purposes

14 of any such entities shall be limited to investing in and

15 assisting community development financial institutions in

16 a manner similar to the activities of the Fund under this

17 Act. Any such entities shall be managed exclusively by pri18 vate individuals who are selected in accordance with the

19 laws of the jurisdiction of incorporation.

20 SEC. 9. CLEARINGHOUSE FUNCTION.

21 The Fund shall establish and maintain an informa22 tion clearinghouse in coordination with the Departments

23 of Agriculture, Commerce, and Housing and Urban Devel24 opment, the Small Business Administration, other Federal
31

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1 agencies, and community development financial institu2 tions—

3 (1) to cause to be collected, compiled, and ana4 lyzed information pertinent to community develop5 ment financial institutions that will assist in creat6 ing, developing, expanding, and preserving these in7 stitutions; and

8 (2) to cause to be established a service center

9 for comprehensive information on financial, tech10 nical, and management assistance, case studies of

11 the activities of community development financial in12 stitutions, regulations, and other information that

13 may promote the purposes of this Act.

14 SEC. 10. RECORDKEEPING, REPORTS, AND AUDITS.

15 (a) RECORDKEEPING.—

16 (1) A qualified community development finan17 cial institution receiving assistance from the Fund

18 shall keep such records as may be reasonably nec19 essary to disclose the disposition of any assistance

20 under this Act and to ensure compliance with the re21 quirements of this Act.

22 (2) The Fund shall have access, for the purpose

23 of determining compliance with this Act, to any

24 books, documents, papers, and records of a qualified

25 community development financial institution receiv-
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1 ing assistance from the Fund that are pertinent to

2 assistance received under this Act.

3 (b) REPORTS.—

4 (1) ANNUAL REPORT.—The Fund shall conduct

5 an annual evaluation of the activities carried out

6 pursuant to this Act and shall submit a report of its

7 findings to the President within 120 days of the end

8 of each fiscal year of the Fund. The report shall in9 clude financial statements audited in accordance

10 with subsection (c).

11 (2) INSTITUTIONAL VOICE FOR COMMUNITY DE12 VELOPMENT.—

13 (A) ONGOING STUDY.—The Fund shall

14 conduct, or cause to be conducted, an ongoing

15 study to identify and evaluate the most effective

16 and financially sound policies and practices for

17 encouraging investment in distressed commu18 nities, including small business and commercial

19 lending, business formation and expansion,

20 community and economic development, commer21 cial real estate and multi-family housing, and

22 home mortgages. In addition, the Fund may

23 study, or cause to be studied, related matters,

24 such as identification of sources of and access

25 to capital and loans for community investment;
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1 development of secondary markets for economic

2 and community development, small business

3 and commercial loans, and home mortgage

4 loans and investments; and methods to involve

5 all segments of the financial services industry in

6 community development.

7 (B) CONSULTATION.—In the conduct of

8 the study, the Fund shall consult, or cause con9 sultation with, the Office of the Comptroller of

10 the Currency, the Federal Deposit Insurance

11 Corporation, the Board of Governors of the

12 Federal Reserve System, the Federal Housing

13 Finance Board, the Farm Credit Administra14 tion, the Office of Thrift Supervision, the Na15 tional Credit Union Administration, community

16 reinvestment, civil rights, consumer and finan17 cial organizations, and such representatives of

18 agencies or other persons as the Fund may de19 termine.

20 (C) REPORTS.—Within 270 days after the

21 date of enactment of this Act, the Fund shall

22 report to the President its initial findings and

23 recommendations regarding the matters set

24 forth in subparagraph (A). Thereafter, the

25 Fund shall report its findings and recommenda-
34

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1 tions to the President with the annual report

2 required and recommendations to the President

3 with the annual report required by paragraph

4 (b)(1).

5 (3) INVESTMENT, GOVERNANCE, AND ROLE OF

6 FUND.—Six years following the date of enactment of

7 this Act, the Fund, in accordance with the proce8 dures described in paragraphs (2)(A) and (B), shall

9 conduct a study evaluating the structure, govern10 ance, and performance of the Fund. The study shall

11 be submitted to the President. Such study shall in12 clude an evaluation of the overall performance of the

13 Fund in meeting the purposes of this Act and any

14 recommendations of the Fund for restructuring the

15 Board, altering procedures under which the Fund is

16 governed, the future role of the Fund in addressing

17 community development, and the ability of the Fund

18 to become a private, self-sustaining entity capable of

19 fulfilling the purposes of this Act.

20 (c) EXAMINATION AND AUDIT.—The financial state21 ments of the Fund shall be audited in accordance with

22 section 9105 of title 31, United States Code, except that

23 audits required by section 9105(a) of that title shall be

24 performed annually.
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1 SEC. 11. INVESTMENT OF RECEIPTS AND PROCEEDS.

2 Any dividends on equity investments and proceeds

3 from the disposition of investments, deposits, or member4 ship shares that are received by the Fund as a result of

5 assistance provided pursuant to section 7 of this Act shall

6 be deposited and accredited to an account of the Fund

7 established to carry out the authorized purposes of this

8 Act. Upon request of the Chief Executive Officer, the Sec9 retary of the Treasury shall invest amounts deposited in

10 such account in public debt securities with maturities suit11 able to the needs of the Fund, as determined by the Chief

12 Executive Officer, and bearing interest at rates deter13 mined by the Secretary of the Treasury, taking into con14 sideration current market yields on outstanding market15 able obligations of the United States of comparable matu16 rities. Amounts deposited into the account and interest

17 earned on such amounts pursuant to this section shall be

18 available to the Fund until expended.

19 SEC. 12. AUTHORIZATION OF APPROPRIATIONS.

20 (a) IN GENERAL.—There are authorized to be appro21 priated to the Fund, to remain available until expanded,

22 $60,000,000 for fiscal year 1994, $104,000,000 for fiscal

23 year 1995, $107,000,000 for fiscal year 1996, and

24 $111,000,000 for fiscal year 1997, or such greater sums

25 as may be appropriated, to carry out the purposes of the

26 Act.
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1 (b) ADMINISTRATIVE EXPENSES.—The Fund may

2 set aside up to $10,000,000 each fiscal year to pay admin3 istrative costs and expenses.

4 SEC. 13. CONFORMING AMENDMENT.

5 Section 8E(a)(2) of the Inspector General Act of

6 1978 (5 U.S.C. app. 3, 8E(a)(2)) is amended by inserting

7 ‘‘the Community Development Banking and Financial In8 stitutions Fund,’’ immediately following ‘‘the Community

9 Futures Trading Commission,’’.

10 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

12 ‘‘Community Development, Credit Enhancement, and Reg13 ulatory Improvement Act of 1993’’.

14 (b) TABLE OF CONTENTS.—The table of contents for

15 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—COMMUNITY DEVELOPMENT AND CONSUMER PROTECTION

Subtitle A—Community Development Banking and Financial Institutions Act

Sec. 101. Short title.

Sec. 102. Findings and purposes.

Sec. 103. Definitions.

Sec. 104. Establishment of national fund for community development banking.

Sec. 105. Applications for assistance.

Sec. 106. Community partnerships.

Sec. 107. Selection of institutions.

Sec. 108. Assistance provided by the Fund.

Sec. 109. Community development training.

Sec. 110. Encouragement of private entities.

Sec. 111. Clearinghouse function.

Sec. 112. Recordkeeping, reports, and audits.

Sec. 113. Investment of receipts and proceeds.

Sec. 114. Inspector General.

Sec. 115. Capitalization assistance to enhance liquidity.

Sec. 116. Community development revolving loan fund for credit unions.

Sec. 117. Study of community development credit unions.
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Sec. 118. Regulations.

Sec. 119. Authorization of appropriations.

Subtitle B—Home Ownership and Equity Protection

Sec. 151. Consumer protections for high cost mortgages.

Sec. 152. Civil liability.

Sec. 153. Regulations; effective date.

TITLE II—SMALL BUSINESS CAPITAL FORMATION

Subtitle A—Small Business Loan Securitization

Sec. 201. Short title.

Sec. 202. Small business related security.

Sec. 203. Applicability of margin requirements.

Sec. 204. Borrowing in the course of business.

Sec. 205. Small business related securities as collateral.

Sec. 206. Investment by depository institutions.

Sec. 207. Preemption of State law.

Sec. 208. Insured depository institution capital requirements for transfers of

small business loans.

Sec. 209. Transactions in small business related securities by employee benefit

plans.

Sec. 210. Taxation of small business loan investment conduits.

Subtitle B—Small Business Capital Enhancement

Sec. 251. Findings and purposes.

Sec. 252. Definitions.

Sec. 253. Approving States for participation.

Sec. 254. Participation agreements.

Sec. 255. Terms of participation agreements.

Sec. 256. Reports.

Sec. 257. Reimbursement by the Secretary.

Sec. 258. Reimbursement to the Secretary.

Sec. 259. Regulations.

Sec. 260. Authorization of appropriations.

TITLE III—PAPERWORK REDUCTION AND REGULATORY

IMPROVEMENT

Sec. 301. Incorporated definitions.

Sec. 302. Administrative consideration of burden with new regulations.

Sec. 303. Streamlining of regulatory requirements.

Sec. 304. Elimination of duplicative filings.

Sec. 305. Coordinated and unified examinations.

Sec. 306. Eighteen-month examination rule for certain small institutions.

Sec. 307. Call report simplification.

Sec. 308. Repeal of publication requirements.

Sec. 309. Regulatory appeals process.

Sec. 310. Electronic filing of currency transaction reports.

Sec. 311. Bank Secrecy Act publication requirements.

Sec. 312. Exemption of business loans from Real Estate Settlement Procedures

Act requirements.

Sec. 313. Flexibility in choosing boards of directors.

Sec. 314. Holding company audit requirements.
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•S 1275 RS

Sec. 315. State regulation of real estate appraisals.

Sec. 316. Acceleration of effective date for interaffiliate transactions.

Sec. 317. Collateralization of public deposits.

Sec. 318. Elimination of stock valuation provision.

Sec. 319. Expedited procedures for forming a bank holding company.

Sec. 320. Exemption of certain holding company formations from registration

under the Securities Act of 1933.

Sec. 321. Reduction of post-approval waiting period for bank holding company

acquisitions.

Sec. 322. Reduction of post-approval waiting period for bank mergers.

Sec. 323. Bankers’ banks.

Sec. 324. Bank Service Corporation Act amendment.

Sec. 325. Merger transaction reports.

Sec. 326. Credit card accounts receivable sales.

Sec. 327. Limiting potential liability on foreign accounts.

Sec. 328. Amendments to outdated dividend provisions.

Sec. 329. Elimination of duplicative disclosures for home equity loans.

Sec. 330. Report on capital standards and their impact on the economy.

Sec. 331. Studies on the impact of the payment of interest on reserves.

Sec. 332. Study and report on streamlined lending process for consumer benefit.

Sec. 333. Repeal of outdated charter requirement for national banks.

1 TITLE I—COMMUNITY DEVELOP2 MENT AND CONSUMER PRO3 TECTION

4 Subtitle A—Community Develop5 ment Banking and Financial In6 stitutions Act

7 SEC. 101. SHORT TITLE.

8 This subtitle may be cited as the ‘‘Community Devel9 opment Banking and Financial Institutions Act of 1993’’.

10 SEC. 102. FINDINGS AND PURPOSES.

11 (a) FINDINGS.—The Congress finds that—

12 (1) many of the Nation’s urban, rural, and Na13 tive American communities face critical social and

14 economic problems arising in part from the lack of
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•S 1275 RS

1 economic growth, people living in poverty, and the

2 lack of employment and other opportunities;

3 (2) the restoration and maintenance of the econo4 mies of these communities will require coordinated de5 velopment strategies, intensive supportive services,

6 and increased access to equity investments and loans

7 for development activities, including investment in

8 businesses, housing, commercial real estate, human

9 development, and other activities that promote the

10 long-term economic and social viability of the com11 munity; and

12 (3) community development financial institu13 tions have proven their ability to identify and re14 spond to community needs for equity investments,

15 loans, and development services.

16 (b) PURPOSE.—The purpose of this subtitle is to create

17 a Community Development Financial Institutions Fund

18 that will promote economic revitalization and community

19 development through a program of investment in and as20 sistance to community development financial institutions,

21 including enhancing the liquidity of community develop22 ment financial institutions.

23 SEC. 103. DEFINITIONS.

24 For purposes of this subtitle, the following definitions

25 shall apply:
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•S 1275 RS

1 (1) APPROPRIATE FEDERAL BANKING AGENCY.—

2 The term ‘‘appropriate Federal banking agency’’ has

3 the same meaning as in section 3 of the Federal De4 posit Insurance Act, and also includes the National

5 Credit Union Administration Board with respect to

6 insured credit unions.

7 (2) AFFILIATE.—The term ‘‘affiliate’’ has the

8 same meaning as in section 2(k) of the Bank Holding

9 Company Act of 1956.

10 (3) COMMUNITY DEVELOPMENT FINANCIAL INSTI11 TUTION.—

12 (A) IN GENERAL.—The term ‘‘community

13 development financial institution’’ means a per14 son (other than an individual) that—

15 (i) has a primary mission of promot16 ing community development;

17 (ii) serves an investment area or tar18 geted population;

19 (iii) directly, through an affiliate, or

20 through a community partnership, provides

21 development services and equity investments

22 or loans;

23 (iv) maintains, through representation

24 on its governing board or otherwise, ac-
41

•S 1275 RS

1 countability to residents of its investment

2 area or targeted population; and

3 (v) is not an agency or instrumentality

4 of the United States, or of any State or po5 litical subdivision of a State.

6 (B) QUALIFICATION OF AFFILIATES.—A

7 subsidiary may only qualify as a community de8 velopment financial institution if its parent

9 company and the subsidiaries thereof (on a con10 solidated basis) also qualify as community devel11 opment financial institutions.

12 (4) COMMUNITY PARTNER.—The term ‘‘commu13 nity partner’’ means a person (other than an individ14 ual) that provides loans, equity investments, or devel15 opment services, including a depository institution

16 holding company, an insured depository institution,

17 an insured credit union, a nonprofit organization, a

18 State or local government agency, and an investment

19 company authorized to operate pursuant to the Small

20 Business Investment Act of 1958.

21 (5) COMMUNITY PARTNERSHIP.—The term ‘‘com22 munity partnership’’ means an agreement between a

23 community development financial institution and a

24 community partner to provide development services
42

•S 1275 RS

1 and loans or equity investments to an investment

2 area or targeted population.

3 (6) DEPOSITORY INSTITUTION HOLDING COM4 PANY.—The term ‘‘depository institution holding com5 pany’’ has the same meaning as in section 3 of the

6 Federal Deposit Insurance Act.

7 (7) DEVELOPMENT SERVICES.—The term ‘‘devel8 opment services’’ means activities that promote com9 munity development and are integral to lending or

10 investment activities, including—

11 (A) business planning;

12 (B) financial and credit counseling; and

13 (C) marketing and management assistance.

14 (8) INSURED COMMUNITY DEVELOPMENT FINAN15 CIAL INSTITUTION.—The term ‘‘insured community

16 development financial institution’’ means any com17 munity development financial institution that is an

18 insured depository institution or an insured credit

19 union.

20 (9) INSURED CREDIT UNION.—The term ‘‘insured

21 credit union’’ has the same meaning as in section

22 101(7) of the Federal Credit Union Act.

23 (10) INSURED DEPOSITORY INSTITUTION.—The

24 term ‘‘insured depository institution’’ has the same
43

•S 1275 RS

1 meaning as in section 3 of the Federal Deposit Insur2 ance Act.

3 (11) INVESTMENT AREA.—The term ‘‘investment

4 area’’ means a geographic area that—

5 (A)(i) meets objective criteria of economic

6 distress developed by the Community Develop7 ment Financial Institutions Fund, which may

8 include the percentage of low-income families or

9 the extent of poverty, the rate of unemployment

10 or underemployment, lag in population growth,

11 and extent of blight and disinvestment; and

12 (ii) has significant unmet needs for loans or

13 equity investments;

14 (B) is located in an empowerment zone or

15 enterprise community designated under section

16 1391 of the Internal Revenue Code of 1986; or

17 (C) is located on an Indian reservation, as

18 defined in section 3(d) of the Indian Financing

19 Act of 1974 or section 4(10) of the Indian Child

20 Welfare Act of 1978.

21 (12) LOW-INCOME.—The term ‘‘low-income’’

22 means having an income, adjusted for family size, of

23 not more than—

24 (A) for metropolitan areas, 80 percent of the

25 area median income; and
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•S 1275 RS

1 (B) for nonmetropolitan areas, the greater

2 of—

3 (i) 80 percent of the area median in4 come; and

5 (ii) 80 percent of the statewide

6 nonmetropolitan area median income.

7 (13) PARENT COMPANY.—The term ‘‘parent com8 pany’’ means any company that directly or indirectly

9 controls another company.

10 (14) SUBSIDIARY.—The term ‘‘subsidiary’’ has

11 the same meaning as in section 3 of the Federal De12 posit Insurance Act, except that a community devel13 opment financial institution that is a corporation

14 shall not be considered to be a subsidiary of any in15 sured depository institution or depository institution

16 holding company that controls less than 25 percent of

17 the voting shares of the corporation.

18 (15) TARGETED POPULATION.—The term ‘‘tar19 geted population’’ means low-income persons or per20 sons who otherwise lack adequate access to loans or

21 equity investments.

22 SEC. 104. ESTABLISHMENT OF NATIONAL FUND FOR COM23 MUNITY DEVELOPMENT BANKING.

24 (a) ESTABLISHMENT.—
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•S 1275 RS

1 (1) IN GENERAL.—There is established a cor2 poration to be known as the Community Development

3 Financial Institutions Fund (hereafter in this subtitle

4 referred to as the ‘‘Fund’’) that shall have the duties

5 and responsibilities specified by this subtitle. The

6 Fund shall have succession until dissolved. The offices

7 of the Fund shall be in Washington, D.C. The Fund

8 shall not be affiliated with or be within any other

9 agency or department of the Federal Government.

10 (2) WHOLLY OWNED GOVERNMENT CORPORA11 TION.—The Fund shall be a wholly owned Govern12 ment corporation in the executive branch and shall be

13 treated in all respects as an agency of the United

14 States, except as otherwise provided in this subtitle.

15 (b) MANAGEMENT OF FUND.—

16 (1) APPOINTMENT OF ADMINISTRATOR AND DEP17 UTY ADMINISTRATOR.—The management of the Fund

18 shall be vested in an Administrator, who shall be ap19 pointed by the President, by and with the advice and

20 consent of the Senate. The Administrator shall not en21 gage in any other business or employment during

22 service as the Administrator. The President may ap23 point a Deputy Administrator by and with the advice

24 and consent of the Senate. The Deputy Administrator

25 shall serve as the acting Administrator of the Fund
46

•S 1275 RS

1 during the absence or disability of the Administrator

2 or in the event of a vacancy in the office of the Ad3 ministrator.

4 (2) CHIEF FINANCIAL OFFICER.—The Adminis5 trator shall appoint a chief financial officer who shall

6 oversee the financial management activities of the

7 Fund.

8 (3) OTHER OFFICERS.—The Administrator may

9 appoint such other officers and employees of the Fund

10 as the Administrator determines to be necessary or

11 appropriate.

12 (c) GENERAL POWERS.—In carrying out the functions

13 of the Fund, the Administrator—

14 (1) shall have all necessary and proper authority

15 to carry out this subtitle;

16 (2) shall have the power to adopt, alter, and use

17 a corporate seal for the Fund, which shall be judi18 cially noticed;

19 (3) may adopt, amend, and repeal bylaws, rules,

20 and regulations governing the manner in which busi21 ness of the Fund may be conducted and such rules

22 and regulations as may be necessary or appropriate

23 to implement this subtitle;

24 (4) may enter into, perform, and enforce such

25 agreements, contracts, and transactions as may be
47

•S 1275 RS

1 deemed necessary or appropriate to the conduct of ac2 tivities authorized under this subtitle;

3 (5) may determine the character of and necessity

4 for expenditures of the Fund and the manner in

5 which they shall be incurred, allowed, and paid;

6 (6) may utilize or employ the services of person7 nel of any agency or instrumentality of the United

8 States with the consent of the agency or instrumental9 ity concerned on a reimbursable or nonreimbursable

10 basis; and

11 (7) may execute all instruments necessary or ap12 propriate in the exercise of any of the functions of the

13 Fund under this subtitle and may delegate to the offi14 cers of the Fund such of the powers and responsibil15 ities of the Administrator as the Administrator deems

16 necessary or appropriate for the administration of the

17 Fund.

18 (d) ADVISORY BOARD.—

19 (1) ESTABLISHMENT.—The Administrator shall

20 establish an advisory board to be known as the Com21 munity Development Advisory Board (hereafter in

22 this subtitle referred to as the ‘‘Board’’) in accordance

23 with the provisions of the Federal Advisory Commit24 tee Act.

25 (2) MEMBERSHIP.—
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•S 1275 RS

1 (A) IN GENERAL.—The Board shall consist

2 of 5 private citizens who, collectively—

3 (i) represent community groups whose

4 constituencies include targeted populations

5 or residents of investment areas;

6 (ii) represent local or regional govern7 ment interests;

8 (iii) have expertise in the operations

9 and activities of insured depository institu10 tions; and

11 (iv) have expertise in community de12 velopment and lending.

13 (B) REPRESENTATION.—Each of the cat14 egories described in clauses (i) through (iv) of

15 subparagraph (A) shall be represented by not less

16 than 1 member of the Board.

17 (3) BOARD FUNCTION.—It shall be the function

18 of the Board to advise the Administrator on the poli19 cies of the Fund. The Board shall not advise the Ad20 ministrator on the granting or denial of any particu21 lar application.

22 (4) TERMS OF MEMBERS.—

23 (A) IN GENERAL.—Each member of the

24 Board shall serve for a term of 4 years.
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•S 1275 RS

1 (B) VACANCIES.—Any member appointed to

2 fill a vacancy occurring prior to the expiration

3 of the term for which the previous member was

4 appointed shall be appointed for the remainder

5 of such term. Members may continue to serve fol6 lowing the expiration of their terms until a suc7 cessor is appointed and qualified.

8 (5) CHAIRPERSON.—The Administrator shall ap9 point a chairperson from among the members of the

10 Board.

11 (6) MEETINGS.—The Board shall meet at least

12 annually and at such other times as requested by the

13 Administrator or the chairperson. A majority of the

14 members of the Board shall constitute a quorum.

15 (7) REIMBURSEMENT FOR EXPENSES.—The

16 members of the Board may receive reimbursement for

17 travel, per diem, and other necessary expenses in18 curred in the performance of their duties, in accord19 ance with the Federal Advisory Committee Act.

20 (8) COSTS AND EXPENSES.—The Fund shall pro21 vide to the Board all necessary staff and facilities.

22 (e) CONFORMING AMENDMENTS.—Section 9101(3) of

23 title 31, United States Code, is amended—
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•S 1275 RS

1 (1) by redesignating subparagraphs (B) through

2 (M) as subparagraphs (C) through (N), respectively;

3 and

4 (2) by inserting after subparagraph (A) the fol5 lowing new subparagraph:

6 ‘‘(B) the Community Development Finan7 cial Institutions Fund;’’.

8 (f) GOVERNMENT CORPORATION CONTROL ACT EX9 EMPTION.—Section 9107(b) of title 31, United States Code,

10 shall not apply to deposits of the Fund made pursuant to

11 section 108.

12 (g) LIMITATION OF FUND AND FEDERAL LIABILITY.—

13 The liability of the Fund and the United States Government

14 arising out of any investment in a community development

15 financial institution in accordance with this subtitle shall

16 be limited to the amount of the investment. The Fund shall

17 be exempt from any assessments and other liabilities that

18 may be imposed on controlling or principal shareholders

19 by any Federal law or the law of any State, Territory, or

20 the District of Columbia.

21 (h) PROHIBITION ON ISSUANCE OF SECURITIES.—The

22 Fund may not issue stock, bonds, debentures, notes, or other

23 securities.

24 (i) COMPENSATION.—Title 5, United States Code, is

25 amended—
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•S 1275 RS

1 (1) in section 5314, by adding at the end the fol2 lowing:

3 ‘‘Administrator of the Community Development

4 Financial Institutions Fund.’’; and

5 (2) in section 5315, by adding at the end the fol6 lowing:

7 ‘‘Deputy Administrator of the Community Devel8 opment Financial Institutions Fund.’’.

9 (j) ASSISTED INSTITUTIONS NOT UNITED STATES IN10 STRUMENTALITIES.—A community development financial

11 institution or other organization that receives assistance

12 pursuant to this subtitle shall not be deemed to be an agen13 cy, department, or instrumentality of the United States.

14 SEC. 105. APPLICATIONS FOR ASSISTANCE.

15 (a) FORM AND PROCEDURES.—An application for as16 sistance under this subtitle shall be submitted in such form

17 and in accordance with such procedures as the Fund shall

18 establish.

19 (b) MINIMUM REQUIREMENTS.—Except as provided in

20 sections 106 and 115, the Fund shall require an applica21 tion—

22 (1) to establish that the applicant is, or will be,

23 a community development financial institution;

24 (2) to include a comprehensive strategic plan for

25 the organization that contains—
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•S 1275 RS

1 (A) a business plan of not less than 5 years

2 in duration that demonstrates that the applicant

3 will be properly managed and will have the ca4 pacity to operate a community development fi5 nancial institution that will not be dependent

6 upon assistance from the Fund for continued vi7 ability;

8 (B) an analysis of the needs of the invest9 ment area or targeted population and a strategy

10 for how the applicant will attempt to meet those

11 needs;

12 (C) a plan to coordinate use of assistance

13 from the Fund with existing Federal, State, and

14 local assistance programs, and private sector fi15 nancial services;

16 (D) an explanation of how the proposed ac17 tivities of the applicant are consistent with exist18 ing economic, community, and housing develop19 ment plans adopted by or applicable to an in20 vestment area; and

21 (E) a description of how the applicant will

22 coordinate with community organizations and

23 financial institutions which will provide equity

24 investments, loans, secondary markets, or other
53

•S 1275 RS

1 services to investment areas or targeted popu2 lations;

3 (3) to include a detailed description of the appli4 cant’s plans and likely sources of funds to match the

5 amount of assistance requested from the Fund;

6 (4) in the case of an applicant that has pre7 viously received assistance under this subtitle, to dem8 onstrate that the applicant—

9 (A) has substantially met its performance

10 goals and otherwise carried out its responsibil11 ities under this subtitle and the assistance agree12 ment; and

13 (B) will expand its operations into a new

14 investment area or to serve a new targeted popu15 lation, offer more services, or increase the volume

16 of its business;

17 (5) in the case of an applicant with a prior his18 tory of serving investment areas or targeted popu19 lations, to demonstrate that the applicant—

20 (A) has a record of success in serving in21 vestment areas or targeted populations;

22 (B) will expand its operations into a new

23 investment area or to serve a new targeted popu24 lation, offer more services, or increase the volume

25 of its current business; and
54

•S 1275 RS

1 (6) to include such other information as the

2 Fund deems appropriate.

3 (c) PREAPPLICATION OUTREACH PROGRAM.—The

4 Fund may operate an outreach program to identify and

5 provide information to potential applicants.

6 SEC. 106. COMMUNITY PARTNERSHIPS.

7 (a) APPLICATION.—An application for assistance may

8 be filed jointly by a community development financial in9 stitution and a community partner to carry out a commu10 nity partnership.

11 (b) APPLICATION REQUIREMENTS.—The Fund shall

12 require a community partnership application—

13 (1) to meet the minimum requirements estab14 lished for community development financial institu15 tions under section 105(b), except that the criteria

16 specified in paragraphs (1) and (2)(A) of section

17 105(b) shall not apply to the community partner;

18 (2) to describe how each coapplicant will partici19 pate in carrying out the community partnership and

20 how the partnership will enhance activities serving

21 the investment area or targeted population; and

22 (3) to demonstrate that the community partner23 ship activities are consistent with the strategic plan

24 submitted by the community development financial

25 institution coapplicant.
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1 (c) SELECTION CRITERIA.—The Fund shall consider a

2 community partnership application based on the selection

3 criteria set out in section 107.

4 (d) LIMITATION ON DISTRIBUTION OF ASSISTANCE.—

5 Assistance provided upon approval of an application under

6 this section shall be distributed only to the community de7 velopment financial institution coapplicant, and shall not

8 be used to fund any activities carried out directly by the

9 community partner or an affiliate thereof.

10 (e) OTHER REQUIREMENTS AND LIMITATIONS.—All

11 other requirements and limitations imposed by this subtitle

12 on a community development financial institution assisted

13 under this subtitle shall apply (in the manner that the

14 Fund determines to be appropriate) to assistance provided

15 to carry out community partnerships. The Fund may estab16 lish additional guidelines and restrictions on the use of Fed17 eral funds to carry out community partnerships.

18 SEC. 107. SELECTION OF INSTITUTIONS.

19 (a) SELECTION CRITERIA.—Except as provided in sec20 tion 115, the Fund shall, in its sole discretion, select appli21 cants for assistance based on—

22 (1) the likelihood of success of the applicant in

23 meeting the goals of its comprehensive strategic plan;

24 (2) the experience and background of the pro25 posed management team;
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•S 1275 RS

1 (3) the extent of need for equity investments,

2 loans, and development services within the investment

3 areas or targeted populations;

4 (4) the extent of economic distress within the in5 vestment areas or the extent of need within the tar6 geted populations, as those factors are measured by

7 objective criteria;

8 (5) the extent to which the applicant will con9 centrate its activities on serving its investment areas

10 or targeted populations;

11 (6) the amount of firm commitments to meet or

12 exceed the matching requirements and the likely suc13 cess of the plan for raising the balance of the match;

14 (7) the extent to which the proposed activities

15 will expand economic opportunities within the invest16 ment areas or the targeted populations;

17 (8) whether the applicant is, or will become, an

18 insured depository institution or an insured credit

19 union;

20 (9) whether the applicant is, or will be, lo21 cated—

22 (A) in an empowerment zone or enterprise

23 community designated under section 1391 of the

24 Internal Revenue Code of 1986; or
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•S 1275 RS

1 (B) on an Indian reservation, as defined in

2 section 3(d) of the Indian Financing Act of 1974

3 or section 4(10) of the Indian Child Welfare Act

4 of 1978;

5 (10) the extent to which the applicant will in6 crease its resources through coordination with other

7 institutions or participation in a secondary market;

8 (11) in the case of an applicant with a prior his9 tory of serving investment areas or targeted popu10 lations, the extent of success in serving them; and

11 (12) other factors (such as the extent to which the

12 applicant has strong ties to the community that it

13 will serve) deemed to be appropriate by the Fund.

14 (b) GEOGRAPHIC DIVERSITY.—The Fund shall assist

15 a geographically diverse group of applicants, including an

16 appropriate mix of applicants from urban, rural, and Na17 tive American communities.

18 SEC. 108. ASSISTANCE PROVIDED BY THE FUND.

19 (a) FORMS OF ASSISTANCE.—

20 (1) IN GENERAL.—The Fund may provide—

21 (A) financial assistance through equity in22 vestments, deposits, credit union shares, loans,

23 and grants; and

24 (B) technical assistance—

25 (i) directly;
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•S 1275 RS

1 (ii) through grants; or

2 (iii) by contracting with organizations

3 that possess expertise in community devel4 opment, without regard to whether the orga5 nizations receive or are eligible to receive

6 assistance under this subtitle.

7 (2) EQUITY INVESTMENTS.—The Fund shall not

8 own more than 50 percent of the equity of a commu9 nity development financial institution and may not

10 control the operations of such institution. The Fund

11 may hold only transferable, nonvoting equity invest12 ments. Such equity investments may provide for con13 vertibility to voting stock upon transfer by the Fund.

14 (3) DEPOSITS.—Deposits made pursuant to this

15 section in an insured community development finan16 cial institution shall not be subject to any require17 ment for collateral or security.

18 (4) LIMITATIONS ON OBLIGATIONS.—Direct loan

19 obligations may be incurred by the Fund only to the

20 extent that appropriations of budget authority to

21 cover their costs, as defined in section 502 of the Con22 gressional Budget Act of 1974, are made in advance.

23 (b) USES OF FINANCIAL ASSISTANCE.—

24 (1) IN GENERAL.—Financial assistance made

25 available under this subtitle may be used by assisted
59

•S 1275 RS

1 institutions to serve investment areas or targeted pop2 ulations by developing or supporting—

3 (A) commercial facilities that promote revi4 talization, community stability, or job creation

5 or retention;

6 (B) businesses that—

7 (i) provide jobs for low-income people

8 or are owned by low-income people; or

9 (ii) enhance the availability of prod10 ucts and services to low-income people;

11 (C) community facilities;

12 (D) the provision of basic financial services;

13 (E) housing that is principally affordable to

14 low-income people, except that assistance used to

15 facilitate homeownership opportunities shall only

16 be used for activities and lending products that

17 serve low-income people and are not offered by

18 other lenders in the area; and

19 (F) other businesses and activities deemed

20 appropriate by the Fund.

21 (2) LIMITATIONS.—No assistance made available

22 under this subtitle may be expended by a community

23 development financial institution (or an organization

24 receiving assistance under section 115) to pay any

25 person to influence or attempt to influence any agen-
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•S 1275 RS

1 cy, elected official, officer, or employee of a State or

2 local government in connection with the making,

3 award, extension, continuation, renewal, amendment,

4 or modification of any State or local government con5 tract, grant, loan, or cooperative agreement (as such

6 terms are defined in section 1352 of title 31, United

7 States Code).

8 (c) USES OF TECHNICAL ASSISTANCE.—Technical as9 sistance may be used for activities that enhance the capac10 ity of a community development financial institution, such

11 as training of management and other personnel and devel12 opment of programs and investment or loan products.

13 (d) AMOUNT OF ASSISTANCE.—

14 (1) IN GENERAL.—The Fund may provide not

15 more than $5,000,000 of assistance, in the aggregate,

16 during any 3-year period to any 1 community devel17 opment financial institution and its affiliates.

18 (2) EXCEPTION.—Notwithstanding the limita19 tions in paragraph (1), in the case of an existing

20 community development financial institution that

21 proposes to serve an investment area or targeted pop22 ulation outside of any State and outside of any met23 ropolitan area presently served by the institution, the

24 Fund may provide not more than $7,500,000 of as25 sistance to a community development financial insti-
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•S 1275 RS

1 tution, in the aggregate, during any 3-year period, of

2 which not less than $2,500,000 shall be used to estab3 lish affiliates to serve the new investment area or tar4 geted population.

5 (3) TIMING OF ASSISTANCE.—Assistance may be

6 provided as described in paragraphs (1) and (2) in

7 a lump sum or over a period of time, as determined

8 by the Fund.

9 (e) MATCHING REQUIREMENTS.—Assistance other

10 than technical assistance shall be matched with funds from

11 sources other than the Federal Government on the basis of

12 not less than 1 dollar for each dollar provided by the Fund.

13 Such matching funds shall be at least comparable in form

14 and value to the assistance provided by the Fund. The Fund

15 may reduce by up to 50 percent the matching requirements

16 for applicants with severe constraints on available sources

17 of matching funds, except that in any fiscal year, not more

18 than 25 percent of funds disbursed by the Fund may have

19 a reduced match. The Fund shall provide no assistance

20 (other than technical assistance) until a community devel21 opment financial institution has secured firm commitments

22 for the matching funds required.

23 (f) TERMS AND CONDITIONS.—

24 (1) SOUNDNESS OF UNREGULATED INSTITU25 TIONS.—The Fund shall—
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•S 1275 RS

1 (A) ensure, to the maximum extent prac2 ticable, that each community development finan3 cial institution (other than an insured commu4 nity development financial institution or deposi5 tory institution holding company) assisted under

6 this subtitle is financially and managerially

7 sound and maintains appropriate internal con8 trols; and

9 (B) require such institution to submit, not

10 less than once during each 18-month period, a

11 statement of financial condition audited by an

12 independent certified public accountant as part

13 of the report required by section 112(a)(4).

14 (2) CONSULTATION WITH THE APPROPRIATE

15 BANKING REGULATOR.—Prior to providing assistance

16 to an insured community development financial insti17 tution, the Fund shall consult with the appropriate

18 Federal banking agency.

19 (3) ASSISTANCE AGREEMENT.—

20 (A) IN GENERAL.—Before providing any as21 sistance under this subtitle, the Fund and each

22 community development financial institution to

23 be assisted shall enter into an agreement that re24 quires the institution to comply with perform25 ance goals and abide by other terms and condi-
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•S 1275 RS

1 tions pertinent to assistance received under this

2 subtitle.

3 (B) PERFORMANCE GOALS.—Performance

4 goals shall be negotiated between the Fund and

5 each community development financial institu6 tion receiving assistance based upon the strategic

7 plan submitted pursuant to section 105(b)(2).

8 Such goals may be modified with the consent of

9 the parties, or as provided in subparagraph (C).

10 Performance goals for insured community devel11 opment financial institutions shall be determined

12 in consultation with the appropriate Federal

13 banking agency.

14 (C) SANCTIONS.—The agreement shall pro15 vide that, in the event of fraud, mismanagement,

16 noncompliance with this subtitle, or noncompli17 ance with the terms of the agreement, the Fund,

18 in its discretion, may—

19 (i) revoke approval of the application;

20 (ii) terminate or reduce future assist21 ance;

22 (iii) require repayment of assistance;

23 (iv) require changes to the performance

24 goals imposed pursuant to subparagraph

25 (B);
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•S 1275 RS

1 (v) bar an applicant from reapplying

2 for assistance from the Fund;

3 (vi) require changes to the strategic

4 plan submitted pursuant to section

5 105(b)(2); and

6 (vii) take such other actions as the

7 Fund deems appropriate.

8 (D) INSURED COMMUNITY DEVELOPMENT

9 FINANCIAL INSTITUTIONS.—In the case of an in10 sured community development financial institu11 tion, the Fund shall notify the appropriate Fed12 eral banking agency not less than 15 days before

13 imposing sanctions pursuant to this paragraph

14 and shall not impose such sanctions if the agen15 cy disapproves, with an explanation in writing,

16 during that 15-day period.

17 (g) AUTHORITY TO SELL EQUITY INVESTMENTS AND

18 LOANS.—The Fund may, at any time, sell its equity invest19 ments and loans, but the Fund shall retain the power to

20 enforce limitations on assistance entered into in accordance

21 with the requirements of this subtitle until the performance

22 goals related to the investment or loan have been met.

23 (h) NO AUTHORITY TO LIMIT SUPERVISION AND REG24 ULATION.—Nothing in this subtitle shall affect any author-
65

•S 1275 RS

1 ity of the appropriate Federal banking agency to supervise

2 and regulate any institution or company.

3 SEC. 109. COMMUNITY DEVELOPMENT TRAINING.

4 (a) IN GENERAL.—The Fund may operate a training

5 program to increase the capacity and expertise of commu6 nity development financial institutions and other members

7 of the financial services industry to undertake community

8 development activities (hereafter in this subtitle referred to

9 as the ‘‘training program’’).

10 (b) PROGRAM ACTIVITIES.—The training program

11 shall provide educational programs to assist community de12 velopment financial institutions and other members of the

13 financial services industry in developing lending and in14 vestment products, underwriting and servicing loans, man15 aging equity investments, and implementing development

16 services targeted to areas of economic distress, low-income

17 persons, and persons who lack adequate access to loans and

18 equity investments.

19 (c) PARTICIPATION.—The training program shall be

20 made available to community development financial insti21 tutions and other members of the financial services industry

22 that serve or seek to serve areas of economic distress, low23 income persons, and persons who lack adequate access to

24 loans and equity investments.
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•S 1275 RS

1 (d) CONTRACTING.—The Fund may offer the training

2 described in this section directly or through a contract with

3 other organizations. The Fund may contract to provide the

4 training with organizations that possess special expertise

5 in community development, without regard to whether the

6 organizations receive or are eligible to receive assistance

7 under this subtitle.

8 (e) FEES.—The Fund, as it deems appropriate, may

9 charge fees for participation in training services to offset

10 the cost of providing the services.

11 SEC. 110. ENCOURAGEMENT OF PRIVATE ENTITIES.

12 The Fund may facilitate the organization of corpora13 tions in which the Federal Government has no ownership

14 interest that will complement the activities of the Fund in

15 carrying out the purpose of this subtitle. The purpose of

16 any such entity shall be to assist community development

17 financial institutions in a manner that is complementary

18 to the activities of the Fund under this subtitle. Any such

19 entity shall be managed exclusively by persons not employed

20 by the Federal Government or any agency or instrumental21 ity thereof.

22 SEC. 111. CLEARINGHOUSE FUNCTION.

23 (a) ESTABLISHMENT.—The Fund may establish and

24 maintain an information clearinghouse in coordination
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•S 1275 RS

1 with other Federal departments or agencies and community

2 development financial institutions to—

3 (1) collect, compile, and analyze information

4 pertinent to community development financial insti5 tutions that will assist in creating, developing, ex6 panding, and preserving these institutions; and

7 (2) provide information on financial, technical,

8 and management assistance, data on the activities of

9 community development financial institutions, regu10 lations, and other information that may promote the

11 purposes of this subtitle.

12 (b) COSTS.—The cost of maintaining the clearinghouse

13 shall be shared equally by the Fund and each department

14 or agency involved in maintaining the clearinghouse.

15 SEC. 112. RECORDKEEPING, REPORTS, AND AUDITS.

16 (a) RECORDKEEPING.—

17 (1) IN GENERAL.—A community development fi18 nancial institution receiving assistance from the

19 Fund shall keep such records, for such periods as may

20 be prescribed, as may be necessary to disclose the

21 manner in which any assistance under this subtitle is

22 used and to demonstrate compliance with the require23 ments of this subtitle.

24 (2) ACCESS TO RECORDS.—The Fund shall have

25 access on demand, for the purpose of determining
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•S 1275 RS

1 compliance with this subtitle, to any records of a

2 community development financial institution that re3 ceives assistance from the Fund.

4 (3) REVIEW.—Not less than annually, the Fund

5 shall review the progress of each assisted community

6 development financial institution in carrying out its

7 strategic plan, meeting its performance goals, and

8 satisfying the terms and conditions of its assistance

9 agreement.

10 (4) REPORTING.—

11 (A) ANNUAL REPORTS.—The Fund shall re12 quire each community development financial in13 stitution receiving assistance under this subtitle

14 to submit an annual report to the Fund on its

15 activities, its financial condition, and its success

16 in meeting performance goals, in satisfying the

17 terms and conditions of its assistance agreement,

18 and in complying with other requirements of this

19 subtitle in such form and manner as the Fund

20 shall specify.

21 (B) AVAILABILITY OF REPORTS.—The

22 Fund, after deleting or redacting any material,

23 as appropriate to protect privacy or proprietary

24 interests, shall make such reports available for

25 public inspection.
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•S 1275 RS

1 (b) ANNUAL REPORT BY THE FUND.—The Fund shall

2 conduct an annual evaluation of the activities carried out

3 by the Fund and the community development financial in4 stitutions assisted pursuant to this subtitle, and shall sub5 mit a report of its findings to the President and the Con6 gress not later than 120 days after the end of each fiscal

7 year of the Fund. The report shall include financial state8 ments audited in accordance with subsection (d).

9 (c) STUDIES.—

10 (1) OPTIONAL STUDIES.—The Fund may con11 duct such studies as the Fund determines necessary to

12 further the purpose of this subtitle and to facilitate

13 investment in distressed communities. The findings of

14 any studies conducted pursuant to this paragraph

15 shall be included in the report required by subsection

16 (b).

17 (2) INVESTMENT, GOVERNANCE, AND ROLE OF

18 FUND.—Thirty months after the appointment and

19 qualification of the Administrator, the Comptroller

20 General shall submit to the President and the Con21 gress a study evaluating the structure, governance,

22 and performance of the Fund.

23 (d) EXAMINATION AND AUDIT.—The financial state24 ments of the Fund shall be audited in accordance with sec25 tion 9105 of title 31, United States Code, except that audits
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•S 1275 RS

1 required by section 9105(a) of such title shall be performed

2 annually.

3 SEC. 113. INVESTMENT OF RECEIPTS AND PROCEEDS.

4 (a) ESTABLISHMENT OF ACCOUNT.—Any dividends on

5 equity investments and proceeds from the disposition of in6 vestments, deposits, or credit union shares that are received

7 by the Fund as a result of assistance provided pursuant

8 to section 108, and any fees received pursuant to section

9 109(e) shall be deposited and accredited to an account of

10 the Fund in the United States Treasury (hereafter in this

11 section referred to as ‘‘the account’’) established to carry

12 out the purpose of this subtitle.

13 (b) INVESTMENTS.—Upon request of the Adminis14 trator, the Secretary of the Treasury shall invest amounts

15 deposited in the account in public debt securities with ma16 turities suitable to the needs of the Fund, as determined

17 by the Administrator, and bearing interest at rates deter18 mined by the Secretary of the Treasury, comparable to cur19 rent market yields on outstanding marketable obligations

20 of the United States of similar maturities.

21 (c) AVAILABILITY.—Amounts deposited into the ac22 count and interest earned on such amounts pursuant to this

23 section shall be available to the Fund until expended.
71

•S 1275 RS

1 SEC. 114. INSPECTOR GENERAL.

2 (a) ESTABLISHMENT.—Section 11 of the Inspector

3 General Act of 1978 (5 U.S.C. App. 11) is amended—

4 (1) in paragraph (1), by inserting ‘‘; the Admin5 istrator of the Community Development Financial In6 stitutions Fund;’’ before ‘‘and the chief’’; and

7 (2) in paragraph (2), by inserting ‘‘the Commu8 nity Development Financial Institutions Fund,’’ after

9 ‘‘the Agency for International Development,’’.

10 (b) AUTHORIZATION OF APPROPRIATIONS.—There are

11 authorized to be appropriated such sums as may be nec12 essary for the operation of the Office of Inspector General

13 established by the amendments made by subsection (a).

14 SEC. 115. CAPITALIZATION ASSISTANCE TO ENHANCE LI15 QUIDITY.

16 (a) ASSISTANCE.—

17 (1) IN GENERAL.—The Fund may provide assist18 ance for the purpose of providing capital to organiza19 tions that will purchase loans or otherwise enhance

20 the liquidity of community development financial in21 stitutions if—

22 (A) the primary purpose of such organiza23 tions is to promote community development; and

24 (B) any assistance received is matched with

25 funds—
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•S 1275 RS

1 (i) from sources other than the Federal

2 Government;

3 (ii) on the basis of not less than $1 for

4 each dollar provided by the Fund; and

5 (iii) that are comparable in form and

6 value to the assistance provided by the

7 Fund.

8 (2) LIMITATION ON OTHER ASSISTANCE.—An or9 ganization that receives assistance under this section

10 may not receive other financial or technical assistance

11 under this subtitle.

12 (b) SELECTION.—The selection of organizations to re13 ceive assistance under this section shall be at the discretion

14 of the Fund and in accordance with criteria established by

15 the Fund. In establishing such criteria, the Fund shall take

16 into account the criteria contained in sections 105(b) and

17 107, as appropriate.

18 (c) AMOUNT OF ASSISTANCE.—The Fund may provide

19 a total of not more than $5,000,000 of assistance to an orga20 nization under this section during any 3-year period. As21 sistance may be provided in a lump sum or over a period

22 of time, as determined by the Fund.

23 (d) AUDIT AND REPORT REQUIREMENTS.—
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•S 1275 RS

1 (1) IN GENERAL.—Organizations that receive as2 sistance from the Fund in accordance with this sec3 tion shall—

4 (A) submit to the Fund not less than once

5 in every 18-month period, financial statements

6 audited by an independent certified public ac7 countant;

8 (B) submit an annual report on its activi9 ties; and

10 (C) keep such records as may be necessary

11 to disclose the manner in which any assistance

12 under this section is used.

13 (2) ACCESS.—The Fund shall have access on de14 mand, for the purposes of determining compliance

15 with this section, to any records of such organiza16 tions.

17 (e) LIMITATIONS ON LIABILITY.—

18 (1) LIABILITY OF FUND.—The liability of the

19 Fund and the United States Government arising out

20 of the provision of assistance to any organization in

21 accordance with this section shall be limited to the

22 amount of such assistance. The Fund shall be exempt

23 from any assessments and any other liabilities that

24 may be imposed on controlling or principal share-
74

•S 1275 RS

1 holders by any Federal law or the law of any State,

2 territory, or the District of Columbia.

3 (2) LIABILITY OF GOVERNMENT.—This section

4 does not oblige the Federal Government, either di5 rectly or indirectly, to provide any funds to any orga6 nization assisted pursuant to this section, or to honor,

7 reimburse, or otherwise guarantee any obligation or

8 liability of such an organization. This section shall

9 not be construed to imply that any such organization

10 or any obligations or securities of any such organiza11 tion are backed by the full faith and credit of the

12 United States.

13 (f) USE OF PROCEEDS.—Any proceeds from the sale

14 of loans to an organization assisted under this section shall

15 be used by the seller for community development purposes.

16 SEC. 116. COMMUNITY DEVELOPMENT REVOLVING LOAN

17 FUND FOR CREDIT UNIONS.

18 (a) REPEAL.—Section 120 of the Federal Credit Union

19 Act (12 U.S.C. 1766) is amended by striking subsection (k).

20 (b) REVOLVING LOAN FUND.—The Federal Credit

21 Union Act (12 U.S.C. 1751 et seq.) is amended by inserting

22 after section 129 the following new section:
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•S 1275 RS

1 ‘‘SEC. 130. COMMUNITY DEVELOPMENT REVOLVING LOAN

2 FUND FOR CREDIT UNIONS.

3 ‘‘(a) IN GENERAL.—The Board may exercise the au4 thority granted to it by the Community Development Credit

5 Union Revolving Loan Fund Transfer Act, including any

6 additional appropriation made or earnings accrued, subject

7 only to this section and to regulations prescribed by the

8 Board.

9 ‘‘(b) INVESTMENT.—The Board may invest any idle

10 Fund moneys in United States Treasury securities. Any in11 terest accrued on such securities shall become a part of the

12 Fund.

13 ‘‘(c) LOANS.—The Board may require that any loans

14 made from the Fund be matched by increased shares in the

15 borrower credit union.

16 ‘‘(d) INTEREST.—Interest earned by the Fund may be

17 allocated by the Board for technical assistance to commu18 nity development credit unions, subject to an appropria19 tions Act.

20 ‘‘(e) DEFINITION.—As used in this section, the term

21 ‘Fund’ means the Community Development Credit Union

22 Revolving Loan Fund.’’.

23 SEC. 117. STUDY OF COMMUNITY DEVELOPMENT CREDIT

24 UNIONS.

25 (a) IN GENERAL.—The National Credit Union Admin26 istration Board, in consultation with representatives of the
76

•S 1275 RS

1 credit union industry, shall conduct a study of community

2 development credit activities by credit unions. In conduct3 ing the study, the Board shall consider—

4 (1) the role of such institutions in providing

5 credit and related financial services to inner city and

6 rural areas;

7 (2) the failure rate of such institutions in the

8 past;

9 (3) the desirability of establishing a special ex10 amination force for community development credit

11 unions and mentor programs;

12 (4) the desirability of establishing a clearing13 house for the recirculation of startup equipment and

14 furniture for community development credit unions;

15 and

16 (5) appropriate startup and permanent financ17 ing programs for such credit unions.

18 (b) REPORT.—Not later than October 1, 1994, the Na19 tional Credit Union Administration Board shall issue a re20 port to the Committee on Banking, Housing, and Urban

21 Affairs of the Senate and the Committee on Banking, Fi22 nance and Urban Affairs of the House of Representatives

23 on the study conducted under subsection (a) and the regu24 latory and legislative changes that may be necessary to en-
77

•S 1275 RS

1 sure that community development activity by credit unions

2 becomes and remains viable and productive.

3 SEC. 118. REGULATIONS.

4 Not later than 180 days after the appointment and

5 qualification of the Administrator, the Fund shall issue

6 such regulations as may be necessary to carry out this sub7 title.

8 SEC. 119. AUTHORIZATION OF APPROPRIATIONS.

9 (a) IN GENERAL.—To carry out this subtitle, there are

10 authorized to be appropriated to the Fund, to remain avail11 able until expended—

12 (1) $60,000,000 for fiscal year 1994;

13 (2) $104,000,000 for fiscal year 1995;

14 (3) $107,000,000 for fiscal year 1996; and

15 (4) $111,000,000 for fiscal year 1997.

16 (b) ADMINISTRATIVE EXPENSES.—Of amounts author17 ized to be appropriated to the Fund—

18 (1) not more than $5,500,000 may be used by the

19 Fund in each fiscal year to pay the administrative

20 costs and expenses of the Fund; and

21 (2) not more than $50,000 may be used by the

22 Fund in each fiscal year to provide for administra23 tive costs and expenses described in section 104(d)(8).

24 (c) COMMUNITY DEVELOPMENT CREDIT UNION RE25 VOLVING LOAN FUND.—There are authorized to be appro-
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•S 1275 RS

1 priated for the purposes of the Community Development

2 Credit Union Revolving Loan Fund—

3 (1) $2,000,000 for fiscal year 1994;

4 (2) $1,000,000 for fiscal year 1995;

5 (3) $1,000,000 for fiscal year 1996; and

6 (4) $1,000,000 for fiscal year 1997.

7 (d) CAPITALIZATION ASSISTANCE.—Not more than 5

8 percent of the amounts authorized to be appropriated under

9 subsection (a) may be used as provided in section 115.

10 (e) BUDGETARY TREATMENT.—Amounts authorized to

11 be appropriated under this section shall be subject to discre12 tionary spending caps, as provided in section 601 of the

13 Congressional Budget Act of 1974, and therefore shall re14 duce by an equal amount funds made available for other

15 discretionary spending programs.

16 Subtitle B—Home Ownership and

17 Equity Protection

18 SEC. 151. CONSUMER PROTECTIONS FOR HIGH COST MORT19 GAGES.

20 (a) DEFINITION.—Section 103 of the Truth in Lending

21 Act (15 U.S.C. 1602) is amended by adding at the end the

22 following new subsection:

23 ‘‘(aa)(1) The term ‘high cost mortgage’ means a

24 consumer credit transaction, other than a residential mort25 gage transaction or a transaction under an open end credit
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1 plan, that is secured by a consumer’s principal dwelling,

2 if—

3 ‘‘(A) the annual percentage rate at consumma4 tion of the transaction will exceed by more than 10

5 percentage points the rate of interest on Treasury se6 curities having comparable periods of maturity on the

7 fifteenth day of the month immediately preceding the

8 month in which the loan is consummated; or

9 ‘‘(B) the total points and fees payable by the

10 consumer at or before closing will exceed the greater

11 of—

12 ‘‘(i) 8 percent of the total loan amount; or

13 ‘‘(ii) $400.

14 ‘‘(2) The amount specified in paragraph (1)(B)(ii)

15 shall be adjusted annually on January 1 by the annual per16 centage change in the Consumer Price Index, as reported

17 on June 1 of the year preceding such adjustment.

18 ‘‘(3) For purposes of paragraph (1)(B), points and fees

19 shall include—

20 ‘‘(A) all items included in the finance charge ex21 cept interest and the time-price differential;

22 ‘‘(B) all compensation paid to mortgage brokers;

23 ‘‘(C) all direct and indirect compensation re24 ceived by the creditor in connection with credit insur25 ance; and
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1 ‘‘(D) each of the charges listed in section 106(e)

2 (except an escrow for future payment of taxes), un3 less—

4 ‘‘(i) the charge is reasonable;

5 ‘‘(ii) the creditor receives no direct or indi6 rect compensation; and

7 ‘‘(iii) the charge is paid to a third party

8 unaffiliated with the creditor.’’.

9 (b) MATERIAL DISCLOSURES.—Section 103(u) of the

10 Truth in Lending Act (15 U.S.C. 1602(u)) is amended—

11 (1) by striking ‘‘and the due dates’’ and insert12 ing ‘‘, the due dates’’; and

13 (2) by inserting before the period ‘‘, and the dis14 closures for high cost mortgages required by section

15 129(a)’’.

16 (c) DEFINITION OF CREDITOR CLARIFIED.—Section

17 103(f) of the Truth in Lending Act (15 U.S.C. 1602(f)) is

18 amended by adding at the end the following: ‘‘Any person

19 who originates 2 or more high cost mortgages in any 12-

20 month period or any person who originates 1 or more high

21 cost mortgages through a mortgage broker shall be consid22 ered to be a creditor for purposes of this title.’’.

23 (d) DISCLOSURES REQUIRED AND CERTAIN TERMS

24 PROHIBITED.—The Truth in Lending Act (15 U.S.C. 1601
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1 et seq.) is amended by inserting after section 128 the follow2 ing new section:

3 ‘‘SEC. 129. REQUIREMENTS FOR HIGH COST MORTGAGES.

4 ‘‘(a) DISCLOSURES.—

5 ‘‘(1) SPECIFIC DISCLOSURES.—In addition to

6 other disclosures required under this title, for each

7 high cost mortgage, the creditor shall provide the fol8 lowing disclosures in conspicuous type size:

9 ‘‘(A) ‘You are not required to complete this

10 agreement merely because you have received these

11 disclosures or have signed a loan application.’

12 ‘‘(B) ‘If you obtain this loan, the lender will

13 have a mortgage on your home. You could lose

14 your home, and any money you have put into it,

15 if you do not meet your obligations under the

16 loan.’.

17 ‘‘(2) ANNUAL PERCENTAGE RATE.—In addition

18 to the disclosures required under paragraph (1), the

19 creditor shall disclose—

20 ‘‘(A) the annual percentage rate of the loan

21 and the amount of the regular monthly payment;

22 or

23 ‘‘(B) in the case of a variable rate loan, the

24 annual percentage rate of the loan, a statement

25 that the interest rate and monthly payment may
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1 increase, and the amount of the maximum pos2 sible monthly payment.

3 ‘‘(b) TIME OF DISCLOSURES.—

4 ‘‘(1) IN GENERAL.—The disclosures required by

5 this section shall be given not less than 3 business

6 days prior to consummation of the transaction.

7 ‘‘(2) NEW DISCLOSURES REQUIRED.—After pro8 viding the disclosures required by this section, a cred9 itor may not change the terms of the loan if such

10 changes make the disclosures inaccurate, unless new

11 disclosures are provided that meet the requirements of

12 this section.

13 ‘‘(3) MODIFICATIONS.—The Board may, if it

14 finds that such action is necessary to permit home15 owners to meet bona fide personal financial emer16 gencies, prescribe regulations authorizing the modi17 fication or waiver of rights created under this sub18 section, to the extent and under the circumstances set

19 forth in those regulations.

20 ‘‘(c) NO PREPAYMENT PENALTY.—

21 ‘‘(1) IN GENERAL.—Except as provided in para22 graph (4), a high cost mortgage may not contain

23 terms under which a consumer must pay a prepay24 ment penalty for paying all or part of the principal

25 of the loan prior to the date on which such principal
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1 is due. If the date of maturity of the high cost mort2 gage is accelerated for any reason, and the consumer

3 is entitled to a rebate of interest, computation of the

4 rebate amount shall comply with paragraph (2). No

5 high cost mortgage shall provide for a default interest

6 rate that is higher than the interest rate provided by

7 the note for the loan prior to default.

8 ‘‘(2) REBATE COMPUTATION.—For purposes of

9 this subsection, any method of computing rebates of

10 interest that is less favorable to the consumer than the

11 actuarial method (as defined in section 933 of the

12 Housing and Community Development Act of 1992)

13 using simple interest is a prepayment penalty.

14 ‘‘(3) CERTAIN OTHER FEES PROHIBITED.—An

15 agreement to refinance a high cost mortgage by the

16 same creditor or an affiliate of the creditor may not

17 require the consumer to pay points, discount fees, or

18 prepaid finance charges on the portion of the loan re19 financed.

20 ‘‘(4) EXCEPTION.—A high cost mortgage may in21 clude terms under which a consumer is required to

22 pay not more than 1 month’s interest as a penalty if

23 the consumer prepays the principal of the loan within

24 90 days of origination.
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1 ‘‘(d) NO BALLOON PAYMENTS.—A high cost mortgage

2 may not include terms under which the aggregate amount

3 of the regular periodic payments would not fully amortize

4 the outstanding principal balance.

5 ‘‘(e) NO NEGATIVE AMORTIZATION.—A high cost mort6 gage may not include terms under which the outstanding

7 principal balance will increase at any time over the course

8 of the loan because the regular periodic payments do not

9 cover the full amount of interest due.

10 ‘‘(f) NO PREPAID PAYMENTS.—A high cost mortgage

11 may not include terms under which more than 2 periodic

12 payments required under the loan are consolidated and

13 paid in advance from the loan proceeds provided to the

14 consumer.

15 ‘‘(g) CONSEQUENCE OF FAILURE TO COMPLY.—Any

16 high cost mortgage loan that contains a provision prohib17 ited by this section shall be deemed a failure to deliver the

18 material disclosures required under this title, for the pur19 pose of section 125.

20 ‘‘(h) DEFINITION.—For purposes of this section, the

21 term ‘affiliate’ has the same meaning as in section 2(k) of

22 the Bank Holding Company Act of 1956.

23 ‘‘(i) DISCRETIONARY REGULATORY AUTHORITY OF

24 BOARD.—
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1 ‘‘(1) EXEMPTIONS.—The Board may, by regula2 tion or order, exempt specific mortgage products or

3 categories of mortgages from any or all of the prohibi4 tions specified in subsections (c) through (f), if the

5 Board finds that the exemption—

6 ‘‘(A) is in the interest of the borrowing pub7 lic; and

8 ‘‘(B) will apply only to products that main9 tain and strengthen home ownership and equity

10 protection.

11 ‘‘(2) PROHIBITIONS.—The Board, by regulation

12 or order, shall prohibit any specific acts or practices

13 in connection with high cost mortgages that the Board

14 finds to be unfair, deceptive, or designed to evade the

15 provisions of this section.’’.

16 (e) CONFORMING AMENDMENTS.—

17 (1) TABLE OF SECTIONS.—The table of sections

18 at the beginning of chapter 2 of the Truth in Lending

19 Act is amended by striking the item relating to sec20 tion 129 and inserting the following:

‘‘129. Requirements for high cost mortgages.’’.

21 (2) TRUTH IN LENDING ACT.—Section 105(a) of

22 the Truth in Lending Act (15 U.S.C. 1604(a)) is

23 amended in the second sentence, by striking ‘‘These’’

24 and inserting ‘‘Except in the case of a high cost mort25 gage, as defined in section 103(aa), these’’.
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1 SEC. 152. CIVIL LIABILITY.

2 (a) DAMAGES.—Section 130(a) of the Truth in Lend3 ing Act (15 U.S.C. 1640(a)) is amended—

4 (1) by striking ‘‘and’’ at the end of paragraph

5 (2)(B);

6 (2) by striking the period at the end of para7 graph (3) and inserting ‘‘; and’’; and

8 (3) by inserting after paragraph (3) the follow9 ing new paragraph:

10 ‘‘(4) in the case of a failure to comply with any

11 requirement under section 129, an amount equal to

12 the sum of all finance charges and fees paid by the

13 consumer, unless the creditor demonstrates that the

14 failure to comply is not material.’’.

15 (b) STATE ATTORNEY GENERAL ENFORCEMENT.—Sec16 tion 130(e) of the Truth in Lending Act (15 U.S.C. 1640(e))

17 is amended by adding at the end the following: ‘‘An action

18 to enforce a violation of section 129 may also be brought

19 by the appropriate State attorney general in any appro20 priate United States district court, or any other court of

21 competent jurisdiction, not later than 3 years after the date

22 on which the violation occurs. The State attorney general

23 shall provide prior written notice of any such civil action

24 to the Federal agency responsible for enforcement under sec25 tion 108 and shall provide the agency with a copy of the

26 complaint. If prior notice is not feasible, the State attorney
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1 general shall provide notice to such agency immediately

2 upon instituting the action. The Federal agency may—

3 ‘‘(1) intervene in the action;

4 ‘‘(2) upon intervening—

5 ‘‘(A) remove the action to the appropriate

6 United States district court, if it was not origi7 nally brought there; and

8 ‘‘(B) be heard on all matters arising in the

9 action; and

10 ‘‘(3) file a petition for appeal.’’.

11 (c) ASSIGNEE LIABILITY.—Section 131 of the Truth in

12 Lending Act (15 U.S.C. 1641) is amended by adding at

13 the end the following new subsection:

14 ‘‘(d) HIGH COST MORTGAGES.—

15 ‘‘(1) IN GENERAL.—In addition to any other li16 ability imposed under this title, any person who pur17 chases or is otherwise assigned a high cost mortgage

18 shall be subject to all claims and defenses with respect

19 to the mortgage that the consumer could assert

20 against the creditor of the mortgage.

21 ‘‘(2) DAMAGES.—Relief provided as a result of

22 liability imposed under paragraph (1) shall be lim23 ited to the sum of—

24 ‘‘(A) the amount of all remaining indebted25 ness; and
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1 ‘‘(B) the total amount paid by the consumer

2 in connection with the transaction.

3 ‘‘(3) NOTICE.—Any person who sells or otherwise

4 assigns a high cost mortgage shall include a promi5 nent notice of the potential liability under this sub6 section as determined by the Board.’’.

7 SEC. 153. REGULATIONS; EFFECTIVE DATE.

8 (a) REGULATIONS.—Not later than 180 days after the

9 date of enactment of this Act, the Board of Governors of

10 the Federal Reserve System shall issue such regulations as

11 may be necessary to carry out this subtitle.

12 (b) EFFECTIVE DATE.—This subtitle, and the amend13 ments made by this subtitle, shall apply to every high cost

14 mortgage (as defined in section 103(aa) of the Truth in

15 Lending Act, as added by section 151(a) of this Act) con16 summated on or after the date which is 60 days after the

17 promulgation of final regulations under subsection (a).

18 TITLE II—SMALL BUSINESS

19 CAPITAL FORMATION

20 Subtitle A—Small Business Loan

21 Securitization

22 SEC. 201. SHORT TITLE.

23 This subtitle may be cited as the ‘‘Small Business

24 Loan Securitization and Secondary Market Enhancement

25 Act of 1993’’.
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1 SEC. 202. SMALL BUSINESS RELATED SECURITY.

2 (a) DEFINITION.—Section 3(a) of the Securities Ex3 change Act of 1934 (15 U.S.C. 78c(a)) is amended by add4 ing at the end the following new paragraph:

5 ‘‘(53)(A) The term ‘small business related secu6 rity’ means a security that is rated in 1 of the 4 high7 est rating categories by at least 1 nationally recog8 nized statistical rating organization, and either—

9 ‘‘(i) represents an interest in 1 or more

10 promissory notes evidencing the indebtedness of a

11 small business concern and originated by an in12 sured depository institution, insured credit

13 union, insurance company, or similar institu14 tion which is supervised and examined by a Fed15 eral or State authority, or a finance company;

16 or

17 ‘‘(ii) is secured by an interest in 1 or more

18 promissory notes (with or without recourse to the

19 issuer) and provides for payments of principal

20 in relation to payments, or reasonable projec21 tions of payments, on notes described in clause

22 (i).

23 ‘‘(B) For purposes of this paragraph—

24 ‘‘(i) an ‘interest in a promissory note’ in25 cludes ownership rights, certificates of interest or

26 participation in such notes, and rights designed
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1 to assure servicing of such notes, or the receipt

2 or timely receipt of amounts payable under such

3 notes;

4 ‘‘(ii) the term ‘small business concern’ has

5 the same meaning as in section 3 of the Small

6 Business Act;

7 ‘‘(iii) the term ‘insured depository institu8 tion’ has the same meaning as in section 3 of the

9 Federal Deposit Insurance Act; and

10 ‘‘(iv) the term ‘insured credit union’ has the

11 same meaning as in section 101 of the Federal

12 Credit Union Act.’’.

13 (b) TECHNICAL AMENDMENT.—Section 3(a) of the Se14 curities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amend15 ed by redesignating paragraph (51) defining the term ‘‘for16 eign financial regulatory authority’’ as paragraph (52) and

17 inserting such paragraph after paragraph (51), defining the

18 term ‘‘penny stocks’’.

19 SEC. 203. APPLICABILITY OF MARGIN REQUIREMENTS.

20 Section 7(g) of the Securities Exchange Act of 1934

21 (15 U.S.C. 78g(g)) is amended by inserting ‘‘or a small

22 business related security’’ after ‘‘mortgage related security’’.

23 SEC. 204. BORROWING IN THE COURSE OF BUSINESS.

24 Section 8(a) of the Securities Exchange Act of 1934

25 (15 U.S.C. 78h(a)) is amended in the last sentence by in-
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1 serting ‘‘or a small business related security’’ after ‘‘mort2 gage related security’’.

3 SEC. 205. SMALL BUSINESS RELATED SECURITIES AS COL4 LATERAL.

5 Clause (ii) of section 11(d)(1) of the Securities Ex6 change Act of 1934 (15 U.S.C. 78k(d)(1)) is amended by

7 inserting ‘‘or any small business related security’’ after

8 ‘‘mortgage related security’’.

9 SEC. 206. INVESTMENT BY DEPOSITORY INSTITUTIONS.

10 (a) HOME OWNERS’ LOAN ACT AMENDMENT.—Section

11 5(c)(1) of the Home Owners’ Loan Act (12 U.S.C.

12 1464(c)(1)) is amended by adding at the end the following

13 new subparagraph:

14 ‘‘(S) SMALL BUSINESS RELATED SECURI15 TIES.—Investments in small business related se16 curities (as defined in section 3(a)(53) of the Se17 curities Exchange Act of 1934), subject to such

18 regulations as the Director may prescribe, in19 cluding regulations concerning the minimum

20 size of the issue (at the time of the initial dis21 tribution), the minimum aggregate sales price,

22 or both.’’.

23 (b) CREDIT UNIONS.—Section 107(15) of the Federal

24 Credit Union Act (12 U.S.C. 1757(15)) is amended—
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1 (1) in subparagraph (A), by striking ‘‘or’’ at the

2 end;

3 (2) in subparagraph (B), by inserting ‘‘or’’ at

4 the end; and

5 (3) by adding at the end the following new sub6 paragraph:

7 ‘‘(C) are small business related securities

8 (as defined in section 3(a)(53) of the Securities

9 Exchange Act of 1934), subject to such regula10 tions as the Board may prescribe, including reg11 ulations prescribing the minimum size of the

12 issue (at the time of the initial distribution), the

13 minimum aggregate sales price, or both;’’.

14 (c) NATIONAL BANKING ASSOCIATIONS.—Section 5136

15 of the Revised Statutes (12 U.S.C. 24) is amended in the

16 last sentence in the first full paragraph of paragraph Sev17 enth, by striking ‘‘or (B) are mortgage related securities’’

18 and inserting the following: ‘‘(B) are small business related

19 securities (as defined in section 3(a)(53) of the Securities

20 Exchange Act of 1934); or (C) are mortgage related securi21 ties’’.

22 SEC. 207. PREEMPTION OF STATE LAW.

23 (a) IN GENERAL.—Section 106(a)(1) of the Secondary

24 Mortgage Market Enhancement Act of 1984 (15 U.S.C. 77r–

25 1(a)(1)) is amended—
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1 (1) by striking ‘‘or’’ at the end of subparagraph

2 (B);

3 (2) by redesignating subparagraph (C) as sub4 paragraph (D); and

5 (3) by inserting after subparagraph (B) the fol6 lowing new subparagraph:

7 ‘‘(C) small business related securities (as de8 fined in section 3(a)(53) of the Securities Ex9 change Act of 1934), or’’.

10 (b) OBLIGATIONS OF THE UNITED STATES.—Section

11 106(a)(2) of the Secondary Mortgage Market Enhancement

12 Act of 1984 (15 U.S.C. 77r–1(a)(2)) is amended—

13 (1) by striking ‘‘or’’ at the end of subparagraph

14 (B);

15 (2) by redesignating subparagraph (C) as sub16 paragraph (D); and

17 (3) by inserting after subparagraph (B) the fol18 lowing new subparagraph:

19 ‘‘(C) small business related securities (as de20 fined in section 3(a)(53) of the Securities Ex21 change Act of 1934), or’’.

22 (c) PREEMPTION OF STATE LAWS.—Section 106(c) of

23 the Secondary Mortgage Market Enhancement Act of 1984

24 (15 U.S.C. 77r–1(c)) is amended—
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1 (1) in the first sentence, by striking ‘‘or that’’

2 and inserting ‘‘, that’’; and

3 (2) by inserting ‘‘, or that are small business re4 lated securities (as defined in section 3(a)(53) of the

5 Securities Exchange Act of 1934)’’ before ‘‘shall be ex6 empt’’.

7 (d) IMPLEMENTATION.—Section 106 of the Secondary

8 Mortgage Market Enhancement Act of 1984 (15 U.S.C. 77r–

9 1) is amended by adding at the end the following new sub10 section:

11 ‘‘(d) IMPLEMENTATION.—

12 ‘‘(1) LIMITATION.—The provisions of subsections

13 (a) and (b) concerning small business related securi14 ties shall not apply with respect to a particular

15 person, trust, corporation, partnership, association,

16 business trust, or business entity or class thereof in

17 any State that, prior to the expiration of 7 years

18 after the date of enactment of this subsection, enacts

19 a statute that specifically refers to this section and ei20 ther prohibits or provides for a more limited author21 ity to purchase, hold, or invest in such small business

22 related securities by any person, trust, corporation,

23 partnership, association, business trust, or business

24 entity or class thereof than is provided in this section.

25 The enactment by any State of any statute of the type
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1 described in the preceding sentence shall not affect the

2 validity of any contractual commitment to purchase,

3 hold, or invest that was made prior to such enact4 ment, and shall not require the sale or other disposi5 tion of any small business related securities acquired

6 prior to the date of such enactment.

7 ‘‘(2) STATE REGISTRATION OR QUALIFICATION

8 REQUIREMENTS.—Any State may, not later than 7

9 years after the date of enactment of this subsection,

10 enact a statute that specifically refers to this section

11 and requires registration or qualification of any

12 small business related securities on terms that differ

13 from those applicable to any obligation issued by the

14 United States.’’.

15 SEC. 208. INSURED DEPOSITORY INSTITUTION CAPITAL RE16 QUIREMENTS FOR TRANSFERS OF SMALL

17 BUSINESS LOANS.

18 (a) ACCOUNTING PRINCIPLES.—The accounting prin19 ciples applicable to the transfer of a small business loan

20 with recourse contained in reports or statements required

21 to be filed with Federal banking agencies by a qualified in22 sured depository institution shall be consistent with gen23 erally accepted accounting principles.

24 (b) CAPITAL AND RESERVE REQUIREMENTS.—With

25 respect to the transfer of a small business loan with recourse
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1 that is a sale under generally accepted accounting prin2 ciples, each qualified insured depository institution shall—

3 (1) establish and maintain a reserve equal to an

4 amount sufficient to meet the reasonable estimated li5 ability of the institution under the recourse arrange6 ment; and

7 (2) include, for purposes of applicable capital

8 standards and other capital measures, only the

9 amount of the retained recourse in the risk-weighted

10 assets of the institution.

11 (c) QUALIFIED INSTITUTIONS CRITERIA.—An insured

12 depository institution is a qualified insured depository in13 stitution for purposes of this section if, without regard to

14 the accounting principles or capital requirements referred

15 to in subsections (a) and (b), the institution is—

16 (1) well capitalized; or

17 (2) with the approval, by regulation or order, of

18 the appropriate Federal banking agency, adequately

19 capitalized.

20 (d) AGGREGATE AMOUNT OF RECOURSE.—The total

21 outstanding amount of recourse retained by a qualified in22 sured depository institution with respect to transfers of

23 small business loans under subsections (a) and (b) shall not

24 exceed—
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1 (1) 15 percent of the risk-based capital of the in2 stitution; or

3 (2) such greater amount, as established by the

4 appropriate Federal banking agency by regulation or

5 order.

6 (e) INSTITUTIONS THAT CEASE TO BE QUALIFIED OR

7 EXCEED AGGREGATE LIMITS.—If an insured depository in8 stitution ceases to be a qualified insured depository institu9 tion or exceeds the limits under subsection (d), this section

10 shall remain applicable to any transfers of small business

11 loans that occurred during the time that the institution was

12 qualified and did not exceed such limit.

13 (f) PROMPT CORRECTIVE ACTION NOT AFFECTED.—

14 The capital of an insured depository institution shall be

15 computed without regard to this section in determining

16 whether the institution is adequately capitalized,

17 undercapitalized, significantly undercapitalized, or criti18 cally undercapitalized under section 38 of the Federal De19 posit Insurance Act.

20 (g) REGULATIONS REQUIRED.—Not later than 180

21 days after the date of the enactment of this Act each appro22 priate Federal banking agency shall promulgate final regu23 lations implementing this section.

24 (h) ALTERNATIVE SYSTEM PERMITTED.—
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1 (1) IN GENERAL.—At the discretion of the appro2 priate Federal banking agency, this section shall not

3 apply if the regulations of the agency provide that the

4 aggregate amount of capital and reserves required

5 with respect to the transfer of small business loans

6 with recourse does not exceed the aggregate amount of

7 capital and reserves that would be required under

8 subsection (b).

9 (2) EXISTING TRANSACTIONS NOT AFFECTED.—

10 Notwithstanding paragraph (1), this section shall re11 main in effect with respect to transfers of small

12 business loans with recourse by qualified insured de13 pository institutions occurring before the effective date

14 of regulations referred to in paragraph (1).

15 (i) DEFINITIONS.—For purposes of this section—

16 (1) the term ‘‘adequately capitalized’’ has the

17 same meaning as in section 38(b) of the Federal De18 posit Insurance Act;

19 (2) the term ‘‘appropriate Federal banking agen20 cy’’ has the same meaning as in section 3 of the Fed21 eral Deposit Insurance Act;

22 (3) the term ‘‘capital standards’’ has the same

23 meaning as in section 38(c) of the Federal Deposit

24 Insurance Act;
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1 (4) the term ‘‘Federal banking agencies’’ has the

2 same meaning as in section 3 of the Federal Deposit

3 Insurance Act;

4 (5) the term ‘‘insured depository institution’’ has

5 the same meaning as in section 3 of the Federal De6 posit Insurance Act;

7 (6) the term ‘‘other capital measures’’ has the

8 meaning as in section 38(c) of the Federal Deposit

9 Insurance Act;

10 (7) the term ‘‘recourse’’ has the meaning given to

11 such term under generally accepted accounting prin12 ciples;

13 (8) the term ‘‘small business’’ means a business

14 that meets the criteria for a small business concern es15 tablished by the Small Business Administration

16 under section 3(a) of the Small Business Act; and

17 (9) the term ‘‘well capitalized’’ has the same

18 meaning as in section 38(b) of the Federal Deposit

19 Insurance Act.

20 SEC. 209. TRANSACTIONS IN SMALL BUSINESS RELATED

21 SECURITIES BY EMPLOYEE BENEFIT PLANS.

22 (a) PROHIBITED TRANSACTION EXEMPTION.—The

23 Secretary of Labor, in consultation with the Secretary of

24 the Treasury, shall exempt transactions involving small

25 business related securities (as defined in section 3(a)(53)
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1 of the Securities Exchange Act of 1934 (as added by section

2 202 of this Act)), either unconditionally or on stated terms

3 and conditions, from the restrictions of sections 406 and

4 407 of the Employee Retirement Income Security Act of

5 1974 (29 U.S.C. 1106, 1107) and the taxes imposed under

6 section 4975 of the Internal Revenue Code of 1986 (26

7 U.S.C. 4975).

8 (b) CONDITIONS.—In providing for the exemption re9 quired under subsection (a), the Secretary of Labor shall

10 consider—

11 (1) the importance of facilitating transactions in

12 small business related securities; and

13 (2) the necessity of imposing any term or condi14 tion to protect the rights and interests of participants

15 and beneficiaries of employee benefit plans affected by

16 the exemption.

17 (c) REGULATIONS.—Not later than 180 days after the

18 date of enactment of this Act, the Secretary of Labor shall

19 promulgate final regulations to carry out subsection (a).

20 SEC. 210. TAXATION OF SMALL BUSINESS LOAN INVEST21 MENT CONDUITS.

22 (a) TAXATION SIMILAR TO REMIC.—The Secretary of

23 the Treasury shall promulgate regulations providing for the

24 taxation of a small business loan investment conduit and

25 the holder of an interest therein similar to the taxation of
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1 a real estate mortgage investment conduit and the holder

2 of interests therein under the Internal Revenue Code of

3 1986.

4 (b) ADJUSTMENT TO REMIC PROVISIONS.—In pro5 mulgating regulations under subsection (a), the Secretary

6 of the Treasury shall make any necessary adjustments to

7 the real estate mortgage investment conduit provisions to

8 take into consideration—

9 (1) the purpose of facilitating the securitization

10 of small business loans through the use of small busi11 ness loan investment conduits and the development of

12 a secondary market in small business loans;

13 (2) differences in the nature of qualifying mort14 gages in a real estate mortgage investment conduit

15 and small business loans and obligations; and

16 (3) differences in the practices of participants in

17 the securitization of real estate mortgages in a real es18 tate mortgage investment conduit and the

19 securitization of other assets.

20 (c) SMALL BUSINESS LOAN INVESTMENT CONDUIT DE21 FINED.—For purposes of this section, the term ‘‘small busi22 ness loan investment conduit’’ means any entity substan23 tially all of the assets of which consist of any obligation

24 (including any participation or certificate of beneficial

25 ownership therein)—
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1 (1) of a business that meets the criteria for a

2 small business concern established under section 3(a)

3 of the Small Business Act; and

4 (2) that was originated by an insured depository

5 institution (as defined in section 3 of the Federal De6 posit Insurance Act), credit union, insurance com7 pany, or similar institution or a finance company

8 which is supervised and examined by an appropriate

9 Federal or State authority.

10 Subtitle B—Small Business Capital

11 Enhancement

12 SEC. 251. FINDINGS AND PURPOSES.

13 (a) FINDINGS.—The Congress finds that—

14 (1) small business concerns are a vital part of

15 the economy, accounting for the majority of new jobs,

16 new products, and new services created in the United

17 States;

18 (2) adequate access to debt capital is a critical

19 component for small business development, productiv20 ity, expansion, and success in the United States;

21 (3) commercial banks are the most important

22 suppliers of debt capital to small business concerns in

23 the United States;
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1 (4) commercial banks and other depository insti2 tutions have various incentives to minimize their risk

3 in financing small business concerns;

4 (5) as a result of such incentives, many small

5 business concerns with economically sound financing

6 needs are unable to obtain access to needed debt cap7 ital;

8 (6) the small business capital access programs

9 implemented by certain States are a flexible and effi10 cient tool to assist financial institutions in providing

11 access to needed debt capital for many small business

12 concerns in a manner consistent with safety and

13 soundness regulations;

14 (7) a small business capital access program

15 would complement other programs which assist small

16 business concerns in obtaining access to capital; and

17 (8) Federal policy can stimulate and accelerate

18 efforts by States to implement small business capital

19 access programs by providing an incentive to States,

20 while leaving the administration of such programs to

21 each participating State.

22 (b) PURPOSES.—By encouraging States to implement

23 administratively efficient capital access programs that en24 courage commercial banks and other depository institutions

25 to provide access to debt capital for a broad portfolio of
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1 small business concerns, and thereby promote a more effi2 cient and effective debt market, the purposes of this subtitle

3 are—

4 (1) to promote economic opportunity and

5 growth;

6 (2) to create jobs;

7 (3) to promote economic efficiency;

8 (4) to enhance productivity; and

9 (5) to spur innovation.

10 SEC. 252. DEFINITIONS.

11 For purposes of this subtitle—

12 (1) the term ‘‘Secretary’’ means the Secretary of

13 Housing and Urban Development;

14 (2) the term ‘‘appropriate Federal banking agen15 cy’’—

16 (A) has the same meaning as in section 3

17 of the Federal Deposit Insurance Act; and

18 (B) includes the National Credit Union Ad19 ministration Board in the case of any credit

20 union the deposits of which are insured in ac21 cordance with the Federal Credit Union Act;

22 (3) the term ‘‘early loan’’ means a loan enrolled

23 at a time when the aggregate covered amount of loans

24 previously enrolled under the Program by a particu-
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1 lar participating financial institution is less than

2 $5,000,000;

3 (4) the term ‘‘enrolled loan’’ means a loan made

4 by a participating financial institution that is en5 rolled by a participating State in accordance with

6 this subtitle;

7 (5) the term ‘‘financial institution’’ means any

8 federally chartered or State-chartered commercial

9 bank, savings association, savings bank, or credit

10 union;

11 (6) the term ‘‘participating financial institu12 tion’’ means any financial institution that has en13 tered into a participation agreement with a partici14 pating State in accordance with section 254;

15 (7) the term ‘‘participating State’’ means any

16 State that has been approved for participation in the

17 Program in accordance with section 253;

18 (8) the term ‘‘passive real estate ownership’’

19 means ownership of real estate for the purpose of de20 riving income from speculation, trade, or rental, ex21 cept that such term shall not include—

22 (A) the ownership of that portion of real es23 tate being used or intended to be used for the op24 eration of the business of the owner of the real
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1 estate (other than the business of passive owner2 ship of real estate); or

3 (B) the ownership of real estate for the pur4 pose of construction or renovation, until the com5 pletion of the construction or renovation phase;

6 (9) the term ‘‘Program’’ means the Small Busi7 ness Capital Enhancement Program established under

8 this subtitle;

9 (10) the term ‘‘reserve fund’’ means a fund, es10 tablished by a participating State, earmarked for a

11 particular participating financial institution, for the

12 purposes of—

13 (A) depositing all required premium

14 charges paid by the participating financial in15 stitution and by each borrower receiving a loan

16 under the Program from a participating finan17 cial institution;

18 (B) depositing contributions made by the

19 participating State; and

20 (C) covering losses on enrolled loans by dis21 bursing accumulated funds; and

22 (11) the term ‘‘State’’ means the States of the

23 United States and the District of Columbia.
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1 SEC. 253. APPROVING STATES FOR PARTICIPATION.

2 (a) APPLICATION.—Any State may apply to the Sec3 retary for approval to be a participating State under the

4 Program and to be eligible for reimbursement by the

5 Secretary pursuant to section 257.

6 (b) APPROVAL CRITERIA.—The Secretary shall ap7 prove a State to be a participating State, if—

8 (1) a specific department or agency of the State

9 has been designated to implement the Program;

10 (2) all legal actions necessary to enable such des11 ignated department or agency to implement the Pro12 gram have been accomplished;

13 (3) funds in the amount of at least $1 for every

14 2 people residing in the State (as of the last decennial

15 census for which data have been released) are avail16 able and have been legally committed to contributions

17 by the State to reserve funds, with such funds being

18 available without time limit and without requiring

19 additional legal action, except that such requirements

20 shall not be construed to limit the authority of the

21 State to take action at a later time that results in the

22 termination of its obligation to enroll loans and make

23 contributions to reserve funds;

24 (4) the State has prescribed a form of participa25 tion agreement to be entered into between it and each

26 participating financial institution that is consistent
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1 with the requirements and purposes of this subtitle;

2 and

3 (5) the State and the Secretary have executed a

4 reimbursement agreement that conforms to the

5 requirements of this subtitle.

6 (c) EXISTING STATE PROGRAMS.—

7 (1) IN GENERAL.—A State that is not a partici8 pating State, but that has its own capital access pro9 gram providing portfolio insurance for business loans

10 (based on a separate loss reserve fund for each finan11 cial institution), may apply at any time to the Sec12 retary to be approved to be a participating State. The

13 Secretary shall approve such State to be a participat14 ing State, and to be eligible for reimbursements by the

15 Secretary pursuant to section 257, if the State—

16 (A) satisfies the requirements of subsections

17 (a) and (b); and

18 (B) certifies that each affected financial in19 stitution has satisfied the requirements of section

20 254.

21 (2) APPLICABLE TERMS OF PARTICIPATION.—

22 (A) STATUS OF INSTITUTIONS.—If a State

23 is approved for participation under paragraph

24 (1), each financial institution with a participa25 tion agreement in effect with the participating
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1 State shall immediately be considered a partici2 pating financial institution. Reimbursements

3 may be made under section 237 in connection

4 with all contributions made to the reserve fund

5 by the State in connection with lending that oc6 curs on or after the date on which the Secretary

7 approves the State for participation.

8 (B) EFFECTIVE DATE OF PARTICIPATION.—

9 If an amended participation agreement that con10 forms with section 255 is required in order to se11 cure participation approval by the Secretary,

12 contributions subject to reimbursement under

13 section 257 shall include only those contributions

14 made to a reserve fund with respect to loans en15 rolled on or after the date that an amended par16 ticipation agreement between the participating

17 State and the participating financial institution

18 becomes effective.

19 (C) USE OF ACCUMULATED RESERVE

20 FUNDS.—A State that is approved for participa21 tion in accordance with this subsection may con22 tinue to implement the program utilizing the re23 serve funds accumulated under the State pro24 gram.
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1 (d) PRIOR APPROPRIATIONS REQUIREMENT.—The

2 Secretary shall not approve a State for participation in

3 the Program until at least $50,000,000 has been appro4 priated to the Secretary (subject to an appropriations Act),

5 without fiscal year limitation, for the purpose of making

6 reimbursements pursuant to section 257.

7 (e) AMENDMENTS TO AGREEMENTS.—If a State that

8 has been approved to be a participating State wishes to

9 amend its form of participation agreement and continue

10 to be a participating State, such State shall submit such

11 amendment for review by the Secretary in accordance with

12 subsection (b)(4). Any such amendment shall become effec13 tive only after it has been approved by the Secretary.

14 SEC. 254. PARTICIPATION AGREEMENTS.

15 (a) IN GENERAL.—A participating State may enter

16 into a participation agreement with any financial institu17 tion determined by the participating State, after consulta18 tion with the appropriate Federal banking agency, to have

19 sufficient commercial lending experience and financial and

20 managerial capacity to participate in the Program. The de21 termination by the State shall not be reviewable by the Sec22 retary.

23 (b) PARTICIPATING FINANCIAL INSTITUTIONS.—Upon

24 entering into the participation agreement with the partici25 pating State, the financial institution shall become a par-
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1 ticipating financial institution eligible to enroll loans

2 under the Program.

3 SEC. 255. TERMS OF PARTICIPATION AGREEMENTS.

4 (a) IN GENERAL.—The participation agreement to be

5 entered into by a participating State and a participating

6 financial institution shall include all provisions required

7 by this section, and shall not include any provisions incon8 sistent with the provisions of this section.

9 (b) ESTABLISHMENT OF SEPARATE RESERVE

10 FUNDS.—A separate reserve fund shall be established by the

11 participating State for each participating financial insti12 tution. All funds credited to a reserve fund shall be subject

13 to the control of the participating State. Notwithstanding

14 the preceding sentence, the participating State may allow

15 a participating financial institution to treat the premium

16 charges paid by the institution and the borrower into the

17 reserve fund, and interest earned thereon, as assets of the

18 institution for accounting purposes. Each reserve fund shall

19 be an administrative account for the purposes of—

20 (1) receiving all required premium charges to be

21 paid by the borrower and participating financial in22 stitution and contributions by the participating

23 State; and

24 (2) disbursing funds, either to cover losses sus25 tained by the participating financial institution in
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1 connection with loans made under the Program, or as

2 contemplated by subsections (d) and (r).

3 (c) INVESTMENT AUTHORITY.—Subject to applicable

4 State law, the participating State may invest, or cause to

5 be invested, funds held in a reserve fund by establishing

6 a deposit account at the participating financial institution

7 in the name of the participating State. In the event that

8 funds in the reserve fund are not deposited in such an ac9 count, such funds shall be invested in a form that the par10 ticipating State determines is safe and liquid.

11 (d) EARNED INCOME AND INTEREST.—Interest or in12 come earned on the funds credited to a reserve fund shall

13 be deemed to be part of the reserve fund, except that a par14 ticipating State may, as further specified in the participa15 tion agreement—

16 (1) provide authority for the participating State

17 to withdraw some or all of such interest or income

18 earned; and

19 (2) allow the participating financial institution,

20 upon its withdrawal from the Program, to withdraw

21 interest or income earned that is deemed to be attrib22 utable to the premium charges paid by the institution

23 and the borrower and that remains in the reserve

24 fund, if such withdrawal does not expose the partici-
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1 pating State to any greater risk of loss than the risk

2 of loss in the absence of such withdrawal.

3 (e) LOAN TERMS AND CONDITIONS.—

4 (1) IN GENERAL.—A loan to be filed for enroll5 ment under the Program may be made with such in6 terest rate, fees, and other terms and conditions as

7 agreed upon by the participating financial institu8 tion and the borrower, consistent with applicable law.

9 (2) LINES OF CREDIT.—If a loan to be filed for

10 enrollment is in the form of a line of credit, the

11 amount of the loan shall be considered to be the maxi12 mum amount that can be drawn by the borrower

13 against the line of credit.

14 (f) ENROLLMENT PROCESS.—

15 (1) FILING.—

16 (A) IN GENERAL.—A participating finan17 cial institution shall file each loan made under

18 the Program for enrollment by completing and

19 submitting to the participating State a form

20 prescribed by the participating State.

21 (B) FORM.—The form referred to in sub22 paragraph (A) shall include a representation by

23 the participating financial institution that it

24 has complied with the participation agreement

25 in enrolling the loan with the State.
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1 (C) PREMIUM CHARGES.—Accompanying

2 the completed form shall be the nonrefundable

3 premium charges paid by the borrower and the

4 participating financial institution, or evidence

5 that such premium charges have been deposited

6 into the deposit account containing the reserve

7 fund, if applicable.

8 (D) SUBMISSION.—The participation agree9 ment shall require that the items required by this

10 subsection shall be submitted to the participating

11 State by the participating financial institutions

12 not later than 10 calendar days after a loan is

13 made.

14 (2) ENROLLMENT BY STATE.—Upon receipt by

15 the participating State of the filing submitted in ac16 cordance with paragraph (1), the participating State

17 shall promptly enroll the loan and make a matching

18 contribution to the reserve fund in accordance with

19 subsection (j), unless the information submitted indi20 cates that the participating financial institution has

21 not complied with the participation agreement in en22 rolling the loan.

23 (g) COVERAGE AMOUNT.—In filing a loan for enroll24 ment under the Program, the participating financial insti-
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1 tution may specify an amount to be covered under the

2 Program that is less than the full amount of the loan.

3 (h) PREMIUM CHARGES.—

4 (1) MINIMUM AND MAXIMUM AMOUNTS.—The

5 premium charges payable to the reserve fund by the

6 borrower and the participating financial institution

7 shall be prescribed by the participating financial in8 stitution, within minimum and maximum limits set

9 forth in the participation agreement. The participa10 tion agreement shall establish minimum and maxi11 mum limits whereby the sum of the premium charges

12 paid in connection with a loan by the borrower and

13 the participating financial institution is not less than

14 3 percent nor more than 7 percent of the amount of

15 the loan covered under the Program.

16 (2) ALLOCATION OF PREMIUM CHARGES.—The

17 participation agreement shall specify terms for allo18 cating premium charges between the borrower and the

19 participating financial institution. However, if the

20 participating financial institution is required to pay

21 any of the premium charges, the participation agree22 ment shall authorize the participating financial insti23 tution to recover from the borrower the cost of the

24 payment of the participating financial institution, in
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1 any manner on which the participating financial

2 institution and the borrower agree.

3 (i) RESTRICTIONS.—

4 (1) ACTIONS PROHIBITED.—Except as provided

5 in subsection (h) and paragraph (2) of this sub6 section, the participating State may not—

7 (A) impose any restrictions or requirements,

8 relating to the interest rate, fees, collateral, or

9 other business terms and conditions of the loan;

10 or

11 (B) condition enrollment of a loan in the

12 Program on the review by the State of the risk

13 or creditworthiness of a loan.

14 (2) EFFECT ON OTHER LAW.—Nothing in this

15 subtitle shall affect the applicability of any other law

16 to the conduct by a participating financial institu17 tion of its business.

18 (j) STATE CONTRIBUTIONS.—In enrolling a loan

19 under the Program, the participating State shall contribute

20 to the reserve fund an amount, as provided for in the par21 ticipation agreement, which shall not be less than the sum

22 of the amount of premium charges paid by the borrower

23 and the participating financial institution.

24 (k) ELEMENTS OF CLAIMS.—
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1 (1) FILING.—If a participating financial insti2 tution charges off all or part of an enrolled loan, such

3 participating financial institution may file a claim

4 for reimbursement with the participating State by

5 submitting a form that—

6 (A) includes the representation by the par7 ticipating financial institution that it is filing

8 the claim in accordance with the terms of the ap9 plicable participation agreement; and

10 (B) contains such other information as may

11 be required by the participating State.

12 (2) TIMING.—Any claim filed under paragraph

13 (1) shall be filed contemporaneously with the action

14 of the participating financial institution to charge off

15 all or part of an enrolled loan. The participating fi16 nancial institution shall determine when and how

17 much to charge off on an enrolled loan, in a manner

18 consistent with its usual method for making such de19 terminations on business loans that are not enrolled

20 loans under this subtitle.

21 (l) ELEMENTS OF CLAIMS.—A claim filed by a partici22 pating financial institution may include the amount of

23 principal charged off, not to exceed the covered amount of

24 the loan. Such claim may also include accrued interest and
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1 out-of-pocket expenses, if and to the extent provided for

2 under the participation agreement.

3 (m) PAYMENT OF CLAIMS.—

4 (1) IN GENERAL.—Except as provided in sub5 section (n) and paragraph (2) of this subsection, upon

6 receipt of a claim filed in accordance with this section

7 and the participation agreement, the participating

8 State shall promptly pay to the participating finan9 cial institution, from funds in the reserve fund, the

10 full amount of the claim as submitted.

11 (2) INSUFFICIENT RESERVE FUNDS.—If there are

12 insufficient funds in the reserve fund to cover the en13 tire amount of a claim of a participating financial

14 institution, the participating State shall pay to the

15 participating financial institution an amount equal

16 to the current balance in the reserve fund. If the en17 rolled loan for which the claim has been filed—

18 (A) is not an early loan, such payment

19 shall be deemed fully to satisfy the claim, and

20 the participating financial institution shall have

21 no other or further right to receive any amount

22 from the reserve fund with respect to such claim;

23 or

24 (B) is an early loan, such payment shall

25 not be deemed fully to satisfy the claim of the
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1 participating financial institution, and at such

2 time as the remaining balance of the claim does

3 not exceed 75 percent of the balance in the re4 serve fund, the participating State shall, upon

5 the request of the participating financial institu6 tion, pay any remaining amount of the claim.

7 (n) DENIAL OF CLAIMS.—A participating State may

8 deny a claim if a representation or warranty made by the

9 participating financial institution to the participating

10 State at the time that the loan was filed for enrollment or

11 at the time that the claim was submitted was known by

12 the participating financial institution to be false.

13 (o) SUBSEQUENT RECOVERY OF CLAIM AMOUNT.—If,

14 subsequent to payment of a claim by the participating

15 State, a participating financial institution recovers from

16 a borrower any amount for which payment of the claim

17 was made, the participating financial institution shall

18 promptly pay to the participating State for deposit into

19 the reserve fund the amount recovered, less any expenses in20 curred by the institution in collection of such amount.

21 (p) PARTICIPATION AGREEMENT TERMS.—

22 (1) IN GENERAL.—In connection with the filing

23 of a loan for enrollment in the Program, the partici24 pation agreement—
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1 (A) shall require the participating financial

2 institution to obtain an assurance from each bor3 rower that—

4 (i) the proceeds of the loan will be used

5 for a business purpose;

6 (ii) the loan will not be used to finance

7 passive real estate ownership; and

8 (iii) the borrower is not—

9 (I) an executive officer, director,

10 or principal shareholder of the partici11 pating financial institution;

12 (II) a member of the immediate

13 family of an executive officer, director,

14 or principal shareholder of the partici15 pating financial institution; or

16 (III) a related interest of any

17 such executive officer, director, prin18 cipal shareholder, or member of the im19 mediate family;

20 (B) shall require the participating financial

21 institution to provide assurances to the partici22 pating State that the loan has not been made in

23 order to place under the protection of the Pro24 gram prior debt that is not covered under the

25 Program and that is or was owed by the bor-
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1 rower to the participating financial institution

2 or to an affiliate of the participating financial

3 institution;

4 (C) may provide that if—

5 (i) a participating financial institu6 tion makes a loan to a borrower that is a

7 refinancing of a loan previously made to

8 the borrower by the participating financial

9 institution or an affiliate of the participat10 ing financial institution;

11 (ii) such prior loan was not enrolled in

12 the Program; and

13 (iii) additional or new financing is ex14 tended by the participating financial insti15 tution as part of the refinancing,

16 the participating financial institution may file

17 the loan for enrollment, with the amount to be

18 covered under the Program not to exceed the

19 amount of any additional or new financing; and

20 (D) may include additional restrictions on

21 the eligibility of loans or borrowers that are not

22 inconsistent with the provisions and purposes of

23 this subtitle.

24 (2) DEFINITIONS.—For purposes of this sub25 section, the terms ‘‘executive officer’’, ‘‘director’’,
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1 ‘‘principal shareholder’’, ‘‘immediate family’’, and

2 ‘‘related interest’’ refer to the same relationship to a

3 participating financial institution as the relationship

4 described in part 215 of title 12 of the Code of Fed5 eral Regulations, or any successor to such part.

6 (q) TERMINATION CLAUSE.—In each participation

7 agreement, the participating State shall reserve for itself the

8 ability to terminate its obligation to enroll loans under the

9 Program. Any such termination shall be prospective only,

10 and shall not apply to amounts of loans enrolled under the

11 Program prior to such termination.

12 (r) ALLOWABLE WITHDRAWALS FROM FUND.—

13 (1) WITHDRAWALS BASED ON OUTSTANDING BAL14 ANCE.—The participation agreement may provide

15 that, if, for any consecutive period of not less than 24

16 months, the aggregate outstanding balance of all en17 rolled loans for a participating financial institution

18 is continually less than the outstanding balance in

19 the reserve fund for that participating financial insti20 tution, the participating State, in its discretion, may

21 withdraw an amount from the reserve fund to bring

22 the balance in the reserve fund down to the outstand23 ing balance of all such enrolled loans.

24 (2) WITHDRAWALS BASED ON PREMIUM

25 CHARGES REMAINING IN FUND.—Upon its withdrawal
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1 from the Program, a participating financial institu2 tion may withdraw from the reserve fund an amount

3 that is equivalent to the premium charges paid into

4 the fund by the institution and the borrower that re5 main in the reserve fund, if such withdrawal would

6 not expose the participating State to a greater risk of

7 loss than the risk of loss in the absence of such with8 drawal.

9 SEC. 256. REPORTS.

10 (a) RESERVE FUNDS REPORT.—On or before the last

11 day of each calendar quarter, a participating State shall

12 submit to the Secretary a report of contributions to reserve

13 funds made by the participating State during the previous

14 calendar quarter. If the participating State has made con15 tributions to one or more reserve funds during the previous

16 quarter, the report shall—

17 (1) indicate the total amount of such contribu18 tions;

19 (2) indicate the amount of contributions which is

20 subject to reimbursement, which shall be equal to the

21 total amount of contributions, unless one of the limi22 tations contained in section 257 is applicable;

23 (3) if one of the limitations in section 257 is ap24 plicable, provide documentation of the applicability of
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1 such limitation for each loan for which the limitation

2 applies; and

3 (4) include a certification by the participating

4 State that—

5 (A) the information provided in accordance

6 with paragraphs (1), (2), and (3) is accurate;

7 (B) funds in an amount meeting the mini8 mum requirements of section 253(b)(3) continue

9 to be available and legally committed to con10 tributions by the State to reserve funds, less any

11 amount that has been contributed by the State to

12 reserve funds subsequent to the State being ap13 proved for participation in the Program;

14 (C) there has been no unapproved amend15 ment to any participation agreement or the form

16 of participation agreements; and

17 (D) the participating State is otherwise im18 plementing the Program in accordance with this

19 subtitle and regulations issued pursuant to

20 section 259.

21 (b) ANNUAL DATA.—Not later than March 31 of each

22 year, each participating State shall submit to the Secretary

23 annual data indicating the number of borrowers financed

24 under the Program, the total amount of covered loans, and
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1 breakdowns by industry type, loan size, annual sales, and

2 number of employees of the borrowers financed.

3 (c) FORM.—The reports and data filed pursuant to

4 subsections (a) and (b) shall be in such form as the Sec5 retary may require.

6 SEC. 257. REIMBURSEMENT BY THE SECRETARY.

7 (a) REIMBURSEMENTS.—Not later than 30 calendar

8 days after receiving a report filed in compliance with sec9 tion 256, the Secretary shall reimburse the participating

10 State in an amount equal to 50 percent of the amount of

11 contributions by the participating State to the reserve funds

12 that are subject to reimbursement by the Secretary pursuant

13 to section 256 and this section. The Secretary shall reim14 burse participating States, as it receives reports pursuant

15 to section 256(a), until available funds are expended.

16 (b) SIZE OF ASSISTED BORROWER.—The Secretary

17 shall not provide any reimbursement to a participating

18 State with respect to an enrolled loan made to a borrower

19 that has 500 or more employees at the time that the loan

20 is enrolled in the Program.

21 (c) THREE-YEAR MAXIMUM.—The amount of reim22 bursement to be provided by the Secretary to a participat23 ing State over any 3-year period in connection with loans

24 made to any single borrower or any group of borrowers

25 among which a common enterprise exists shall not exceed
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1 $75,000. For purposes of this subsection, ‘‘common enter2 prise’’ shall have the same meaning as in part 32 of title

3 12 of the Code of Federal Regulations, or any successor to

4 that part.

5 (d) LOANS TOTALING LESS THAN $2,000,000.—In

6 connection with a loan in which the covered amount of the

7 loan plus the covered amount of all previous loans enrolled

8 by a participating financial institution does not exceed

9 $2,000,000, the amount of reimbursement by the Secretary

10 to the participating State shall not exceed the lesser of—

11 (1) 75 percent of the sum of the premium charges

12 paid to the reserve fund by the borrower and the par13 ticipating financial institution; or

14 (2) 5.25 percent of the covered amount of the

15 loan.

16 (e) LOANS TOTALING MORE THAN $2,000,000.—In

17 connection with a loan in which the sum of the covered

18 amounts of all previous loans enrolled by the participating

19 financial institution in the Program equals or exceeds

20 $2,000,000, the amount of reimbursement to be provided by

21 the Secretary to the participating State shall not exceed the

22 lesser of—

23 (1) 50 percent of the sum of the premium charges

24 paid by the borrower and the participating financial

25 institution; or
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1 (2) 3.5 percent of the covered amount of the loan.

2 (f) OTHER AMOUNTS.—In connection with the enroll3 ment of a loan that will cause the aggregate covered amount

4 of all enrolled loans to exceed $2,000,000, the amount of

5 reimbursement by the Secretary to the participating State

6 shall be determined—

7 (1) by applying subsection (d) to the portion of

8 the loan, which when added to the aggregate covered

9 amount of all previously enrolled loans equals

10 $2,000,000; and

11 (2) by applying subsection (e) to the balance of

12 the loan.

13 SEC. 258. REIMBURSEMENT TO THE SECRETARY.

14 (a) IN GENERAL.—If a participating State withdraws

15 funds from a reserve fund pursuant to terms of the partici16 pation agreement permitted by subsection (d) or (r) of sec17 tion 255, such participating State shall, not later than 15

18 calendar days after such withdrawal, submit to the Sec19 retary an amount computed by multiplying the amount

20 withdrawn by the appropriate factor, as determined under

21 subsection (b).

22 (b) FACTOR.—The appropriate factor shall be obtained

23 by dividing the total amount of contributions that have been

24 made by the participating State to all reserve funds which

25 were subject to reimbursement—
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1 (1) by 2; and

2 (2) by the total amount of contributions made by

3 the participating State to all reserve funds, including

4 if applicable, contributions that have been made by

5 the State prior to becoming a participating State if

6 the State continued its own capital access program in

7 accordance with section 253(b).

8 (c) USE OF REIMBURSEMENTS.—The Secretary may

9 use funds reimbursed pursuant to this section to make reim10 bursements under section 257.

11 SEC. 259. REGULATIONS.

12 The Secretary shall promulgate appropriate regula13 tions to implement this subtitle.

14 SEC. 260. AUTHORIZATION OF APPROPRIATIONS.

15 (a) AMOUNT.—There are authorized to be appro16 priated to the Secretary $50,000,000 to carry out this sub17 title.

18 (b) BUDGETARY TREATMENT.—The amount author19 ized to be appropriated under subsection (a) shall be subject

20 to discretionary spending caps, as provided in section 601

21 of the Congressional Budget Act of 1974, and therefore shall

22 reduce by an equal amount funds made available for other

23 discretionary spending programs.
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1 TITLE III—PAPERWORK REDUC2 TION AND REGULATORY IM3 PROVEMENT

4 SEC. 301. INCORPORATED DEFINITIONS.

5 Unless otherwise specifically provided in this title, for

6 purposes of this title—

7 (1) the terms ‘‘appropriate Federal banking

8 agency’’, ‘‘Federal banking agencies’’, and ‘‘insured

9 depository institution’’ have the same meanings as in

10 section 3 of the Federal Deposit Insurance Act; and

11 (2) the term ‘‘insured credit union’’ has the same

12 meaning as in section 101 of the Federal Credit

13 Union Act.

14 SEC. 302. ADMINISTRATIVE CONSIDERATION OF BURDEN

15 WITH NEW REGULATIONS.

16 In determining the effective date and administrative

17 compliance requirements for new regulations that impose

18 additional reporting, disclosure, or other requirements on

19 insured depository institutions, each Federal banking agen20 cy shall consider, consistent with the principles of safety

21 and soundness and the public interest—

22 (1) any administrative burdens that such regula23 tions would place on depository institutions, includ24 ing small depository institutions, and customers of

25 depository institutions; and
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1 (2) the benefits of such regulations.

2 SEC. 303. STREAMLINING OF REGULATORY REQUIREMENTS.

3 (a) REVIEW OF REGULATIONS; REGULATORY UNI4 FORMITY.—During the 2-year period beginning on the date

5 of enactment of this Act, each Federal banking agency shall,

6 consistent with principles of safety and soundness and the

7 public interest—

8 (1) conduct a review of the regulations and writ9 ten policies of that agency—

10 (A) to streamline those regulations and

11 policies in order to improve efficiency, reduce

12 unnecessary costs, and eliminate unwarranted

13 constraints on credit availability; and

14 (B) to remove inconsistencies and outmoded

15 and duplicative requirements; and

16 (2) work jointly with the other Federal banking

17 agencies to make uniform all regulations and guide18 lines implementing common statutory or supervisory

19 policies.

20 (b) REPORT TO CONGRESS.—The Federal banking

21 agencies shall submit a joint report to the Congress annu22 ally for 2 years following the date of enactment of this Act

23 detailing the progress of the agencies in carrying out the

24 requirements of subsection (a).
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1 SEC. 304. ELIMINATION OF DUPLICATIVE FILINGS.

2 The Federal banking agencies shall work jointly—

3 (1) to eliminate, to the extent practicable, dupli4 cative or otherwise unnecessary requests for informa5 tion in connection with applications or notices to the

6 agencies; and

7 (2) to harmonize, to the extent practicable, any

8 inconsistent publication and public notice require9 ments.

10 SEC. 305. COORDINATED AND UNIFIED EXAMINATIONS.

11 Section 10(d) of the Federal Deposit Insurance Act (12

12 U.S.C. 1820(d)) is amended by adding at the end the follow13 ing new paragraph:

14 ‘‘(6) COORDINATED EXAMINATIONS.—To mini15 mize the disruptive effects of examinations on the op16 erations of insured depository institutions—

17 ‘‘(A) each appropriate Federal banking

18 agency shall, to the extent practicable and con19 sistent with safety and soundness principles and

20 the public interest—

21 ‘‘(i) coordinate examinations to be con22 ducted by that agency at an insured deposi23 tory institution and its affiliates;

24 ‘‘(ii) coordinate with the other appro25 priate Federal banking agencies in the con26 duct of such examinations; and
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1 ‘‘(iii) work to coordinate the conduct of

2 all examinations made pursuant to this

3 subsection with the appropriate State bank

4 supervisor; and

5 ‘‘(B) not later than 2 years after the date

6 of enactment of the Community Development,

7 Credit Enhancement, and Regulatory Improve8 ment Act of 1993, the Federal banking agencies

9 shall jointly establish and implement a system

10 for determining which one of the Federal bank11 ing agencies shall conduct a unified examination

12 of each insured depository institution and its af13 filiates, as required by this subsection, on behalf

14 of all Federal banking agencies.’’.

15 SEC. 306. EIGHTEEN-MONTH EXAMINATION RULE FOR CER16 TAIN SMALL INSTITUTIONS.

17 Section 10(d)(4) of the Federal Deposit Insurance Act

18 (12 U.S.C. 1820(d)(4)) is amended—

19 (1) in subparagraph (A), by striking

20 ‘‘$100,000,000’’ and inserting ‘‘$250,000,000’’;

21 (2) in subparagraph (C), by striking ‘‘and’’ at

22 the end;

23 (3) by redesignating subparagraph (D) as sub24 paragraph (E); and
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1 (4) by inserting after subparagraph (C) the fol2 lowing new subparagraph:

3 ‘‘(D) the insured institution is not currently

4 subject to a formal enforcement proceeding or

5 order by the Corporation or the appropriate Fed6 eral banking agency; and’’.

7 SEC. 307. CALL REPORT SIMPLIFICATION.

8 (a) MODERNIZATION OF CALL REPORT FILING AND

9 DISCLOSURE SYSTEM.—In order to reduce the administra10 tive requirements pertaining to bank reports of condition,

11 savings association financial reports, and bank holding

12 company consolidated and parent-only financial state13 ments, and to improve the timeliness of such reports and

14 statements, the Federal banking agencies shall—

15 (1) work jointly to develop a system under

16 which—

17 (A) insured depository institutions and

18 their affiliates may file such reports and state19 ments electronically; and

20 (B) the Federal banking agencies may make

21 such reports and statements available to the pub22 lic electronically; and

23 (2) not later than 1 year after the date of enact24 ment of this Act, report to the Congress and make rec25 ommendations for legislation that would enhance effi-
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1 ciency for filers and users of such reports and state2 ments.

3 (b) UNIFORM REPORTS AND SIMPLIFICATION OF IN4 STRUCTIONS.—The Federal banking agencies shall, consist5 ent with the principles of safety and soundness, work joint6 ly—

7 (1) to adopt a single form for the filing of core

8 information required to be submitted under Federal

9 law to all such agencies in the reports and statements

10 referred to in subsection (a); and

11 (2) to simplify instructions accompanying such

12 reports and statements and to provide an index to the

13 instructions that is adequate to meet the needs of both

14 filers and users.

15 (c) REVIEW OF CALL REPORT SCHEDULE.—Each Fed16 eral banking agency shall—

17 (1) review the information required by schedules

18 supplementing the core information referred to in

19 subsection (b); and

20 (2) eliminate requirements that are not war21 ranted for reasons of safety and soundness or other

22 public purposes.

23 SEC. 308. REPEAL OF PUBLICATION REQUIREMENTS.

24 (a) REVISED STATUTES.—Section 5211 of the Revised

25 Statutes (12 U.S.C. 161) is amended—
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1 (1) in the fifth sentence of subsection (a), by

2 striking ‘‘; and the statement of resources’’ and all

3 that follows through ‘‘as may be required by the

4 Comptroller’’; and

5 (2) in subsection (c), by striking the fourth sen6 tence.

7 (b) FDIA.—Section 7(a)(1) of the Federal Deposit In8 surance Act (12 U.S.C. 1817(a)(1)) is amended by striking

9 the fourth sentence.

10 (c) FEDERAL RESERVE ACT.—Section 9 of the Federal

11 Reserve Act (12 U.S.C. 324) is amended in the last sentence

12 of the sixth undesignated paragraph, by striking ‘‘and shall

13 be published’’ and all that follows through the end of the

14 sentence and inserting a period.

15 SEC. 309. REGULATORY APPEALS PROCESS.

16 (a) IN GENERAL.—Not later than 180 days after the

17 date of enactment of this Act, each appropriate Federal

18 banking agency and the National Credit Union Adminis19 tration Board shall establish an independent intra-agency

20 appellate process. The process shall be available to review

21 material supervisory determinations made at insured de22 pository institutions or at insured credit unions that the

23 agency supervises.
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1 (b) REVIEW PROCESS.—In establishing the independ2 ent appellate process under subsection (a), each agency shall

3 ensure—

4 (1) that any appeal of a material supervisory

5 determination by an insured depository institution or

6 credit union is heard and decided expeditiously; and

7 (2) that appropriate safeguards exist for protect8 ing the appellant from retaliation by agency examin9 ers.

10 (c) COMMENT PERIOD.—Not later than 90 days after

11 the date of enactment of this Act, each appropriate Federal

12 banking agency and the National Credit Union Adminis13 tration shall provide public notice and opportunity for com14 ment on proposed guidelines for the establishment of an ap15 pellate process under this section.

16 (d) DEFINITIONS.—For purposes of this section—

17 (1) the term ‘‘material supervisory determina18 tions’’ includes determinations relating to—

19 (A) examination ratings;

20 (B) the adequacy of loan loss reserve provi21 sions; and

22 (C) loan classifications on loans that are

23 significant to the institution; and

24 (2) the term ‘‘independent appellate process’’

25 means a review by an agency official who does not di-
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1 rectly or indirectly report to the agency official who

2 made the material supervisory determination under

3 review.

4 (e) EFFECT ON OTHER AUTHORITY.—Nothing in this

5 section shall affect the authority of an appropriate Federal

6 banking agency or the National Credit Union Association

7 Board to take enforcement or supervisory action against an

8 institution.

9 SEC. 310. ELECTRONIC FILING OF CURRENCY TRANS10 ACTION REPORTS.

11 Section 123 of the Bank Secrecy Act (12 U.S.C. 1953)

12 is amended by adding at the end the following new sub13 section:

14 ‘‘(c) ACCEPTANCE OF AUTOMATED RECORDS.—The

15 Secretary shall permit an uninsured bank or financial in16 stitution to retain or maintain records referred to in sub17 section (a) in electronic or automated form, subject to terms

18 and conditions established by the Secretary.’’.

19 SEC. 311. BANK SECRECY ACT PUBLICATION REQUIRE20 MENTS.

21 Chapter 53 of title 31, United States Code, is amended

22 by adding at the end the following new section:

23 ‘‘SEC. 5329. STAFF COMMENTARIES.

24 ‘‘The Secretary shall—
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1 ‘‘(1) publish all written rulings interpreting this

2 chapter; and

3 ‘‘(2) annually issue a staff commentary on the

4 regulations issued under this chapter.’’.

5 SEC. 312. EXEMPTION OF BUSINESS LOANS FROM REAL ES6 TATE SETTLEMENT PROCEDURES ACT RE7 QUIREMENTS.

8 The Real Estate Settlement Procedures Act of 1974 (12

9 U.S.C. 2601 et seq.) is amended by inserting after section

10 6 the following new section:

11 ‘‘SEC. 7. EXEMPTED TRANSACTIONS.

12 ‘‘This Act does not apply to credit transactions involv13 ing extensions of credit—

14 ‘‘(1) primarily for business, commercial, or agri15 cultural purposes; or

16 ‘‘(2) to government or governmental agencies or

17 instrumentalities.’’.

18 SEC. 313. FLEXIBILITY IN CHOOSING BOARDS OF DIREC19 TORS.

20 Section 5146 of the Revised Statutes (12 U.S.C. 72)

21 is amended in the first sentence, by striking ‘‘two thirds’’

22 and inserting ‘‘a majority’’.
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1 SEC. 314. HOLDING COMPANY AUDIT REQUIREMENTS.

2 Section 36(i) of the Federal Deposit Insurance Act (12

3 U.S.C. 1831m(i)) is amended by striking paragraph (2)

4 and inserting the following:

5 ‘‘(2) the institution—

6 ‘‘(A) has total assets, as of the beginning of

7 such fiscal year, of less than $5,000,000,000;

8 ‘‘(B) has—

9 ‘‘(i) total assets, as of the beginning of

10 such fiscal year, of more than

11 $5,000,000,000 and less than

12 $9,000,000,000; and

13 ‘‘(ii) a CAMEL composite rating of 1

14 or 2 under the Uniform Financial Institu15 tions Rating System (or an equivalent rat16 ing by any such agency under a comparable

17 rating system) as of the most recent exam18 ination of such institution by the Corpora19 tion or the appropriate Federal banking

20 agency; or

21 ‘‘(C) has—

22 ‘‘(i) total assets, as of the beginning of

23 such fiscal year, of more than

24 $9,000,000,000; and

25 ‘‘(ii) a CAMEL composite rating of 1

26 under the Uniform Financial Institutions
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1 Rating System (or an equivalent rating by

2 any such agency under a comparable rating

3 system) as of the most recent examination of

4 such institution by the Corporation or the

5 appropriate Federal banking agency.

6 Notwithstanding paragraph (2)(C), in the case of an in7 sured depository institution that the Corporation deter8 mines to be a large institution, the audit committee of the

9 holding company of such an institution shall not include

10 any large customers of the institution.’’.

11 SEC. 315. STATE REGULATION OF REAL ESTATE APPRAIS12 ALS.

13 Section 1122 of the Financial Institutions Reform, Re14 covery, and Enforcement Act of 1989 (12 U.S.C. 3351) is

15 amended—

16 (1) by redesignating subsections (b) through (e)

17 as subsections (c) through (f), respectively;

18 (2) by inserting after subsection (a) the following

19 new subsection:

20 ‘‘(b) RECIPROCITY.—The Appraisal Subcommittee

21 shall encourage the States to develop reciprocity agreements

22 that readily authorize appraisers who are licensed or cer23 tified in one State (and who are in good standing with their

24 State appraiser certifying or licensing agency) to perform

25 appraisals in other States.’’; and
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1 (3) in subsection (a)—

2 (A) by redesignating paragraphs (1)

3 through (3) as subparagraphs (A) through (C);

4 (B) by striking ‘‘A State’’ and inserting the

5 following:

6 ‘‘(1) IN GENERAL.—A State’’; and

7 (C) by adding at the end the following new

8 paragraph:

9 ‘‘(2) FEES FOR TEMPORARY PRACTICE.—A State

10 appraiser certifying or licensing agency shall not im11 pose excessive fees or burdensome requirements, as de12 termined by the Appraisal Subcommittee, for tem13 porary practice under this subsection.’’.

14 SEC. 316. ACCELERATION OF EFFECTIVE DATE FOR

15 INTERAFFILIATE TRANSACTIONS.

16 (a) HOME OWNERS’ LOAN ACT AMENDMENT.—Section

17 11(a)(2) of the Home Owners’ Loan Act (12 U.S.C.

18 1468(a)(2)) is amended by adding at the end the following

19 new subparagraph:

20 ‘‘(C) TRANSITION RULE FOR WELL CAPITAL21 IZED SAVINGS ASSOCIATIONS.—

22 ‘‘(i) IN GENERAL.—A savings associa23 tion that is well capitalized (as defined in

24 section 38 of the Federal Deposit Insurance

25 Act), as determined without including good-
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1 will in calculating core capital, shall be

2 treated as a bank for purposes of section

3 23A(d)(1) and section 23B of the Federal

4 Reserve Act.

5 ‘‘(ii) LIABILITY OF COMMONLY CON6 TROLLED DEPOSITORY INSTITUTIONS.—Any

7 savings association that engages under

8 clause (i) in a transaction that would not

9 otherwise be permissible under this sub10 section, and any affiliated insured bank

11 that is commonly controlled (as defined in

12 section 5(e)(9) of the Federal Deposit Insur13 ance Act), shall be subject to subsection (e)

14 of section 5 of the Federal Deposit Insur15 ance Act as if paragraph (6) of that sub16 section did not apply.’’.

17 (b) REPEAL PROVISION.—Effective on January 1,

18 1995, subparagraph (C) of section 11(a)(2) of the Home

19 Owners’ Loan Act (12 U.S.C. 1468(a)(2)) (as added by sub20 section (a) of this section) is repealed.

21 SEC. 317. COLLATERALIZATION OF PUBLIC DEPOSITS.

22 Section 13(e) of the Federal Deposit Insurance Act (12

23 U.S.C. 1823(e)) is amended—

24 (1) by redesignating paragraphs (1) through (4)

25 as subparagraphs (A) through (D), respectively;
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1 (2) by striking ‘‘No agreement’’ and inserting the

2 following:

3 ‘‘(1) IN GENERAL.—No agreement’’; and

4 (3) by adding at the end the following new para5 graph:

6 ‘‘(2) PUBLIC DEPOSITS.—An agreement to pro7 vide for the lawful collateralization of deposits of a

8 Federal, State, or local governmental entity or of any

9 depositor referred to in section 11(a)(2) shall not be

10 deemed to be invalid pursuant to paragraph (1)(B)

11 solely because of changes in the collateral made in ac12 cordance with such agreement.’’.

13 SEC. 318. ELIMINATION OF STOCK VALUATION PROVISION.

14 (a) IN GENERAL.—Section 39(b)(1) of the Federal De15 posit Insurance Act (12 U.S.C. 1831p–1(b)(1), as added by

16 section 132(a) of the Federal Deposit Insurance Corpora17 tion Improvements Act of 1991) is amended—

18 (1) in subparagraph (A), by adding ‘‘and’’ at the

19 end; and

20 (2) by striking subparagraph (C).

21 (b) EFFECTIVE DATE.—The amendments made by sub22 section (a) shall be construed to have the same effective date

23 as section 39 of the Federal Deposit Insurance Act, as pro24 vided in section 132(c) of the Federal Deposit Insurance

25 Corporation Improvements Act of 1991.
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1 SEC. 319. EXPEDITED PROCEDURES FOR FORMING A BANK

2 HOLDING COMPANY.

3 Section 3(a) of the Bank Holding Company Act of

4 1956 (12 U.S.C. 1842(a)) is amended—

5 (1) in the second sentence, by striking ‘‘or (B)’’

6 and inserting ‘‘(B)’’; and

7 (2) in the second sentence, by inserting before the

8 period the following: ‘‘; or (C) with 30 days prior no9 tification to the Board, the acquisition by a company

10 of control of a bank in a reorganization in which a

11 person or group of persons exchanges its shares of the

12 bank for shares of a newly formed bank holding com13 pany and receives, after the reorganization, substan14 tially the same proportional share interest in the

15 holding company as it held in the bank (except for

16 changes in shareholders’ interests resulting from the

17 exercise of dissenting shareholders’ rights under State

18 or Federal law) if, immediately following the acquisi19 tion, (i) the bank holding company meets the capital

20 and other financial standards prescribed by the

21 Board by regulation for such a bank holding com22 pany; (ii) the bank is adequately capitalized (as de23 fined in section 38 of the Federal Deposit Insurance

24 Act); and (iii) the holding company does not engage

25 in any activities other than those of banking or man26 aging and controlling banks’’.
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1 SEC. 320. EXEMPTION OF CERTAIN HOLDING COMPANY

2 FORMATIONS FROM REGISTRATION UNDER

3 THE SECURITIES ACT OF 1933.

4 Section 4 of the Securities Act of 1933 (15 U.S.C. 77d)

5 is amended by adding at the end the following new para6 graph:

7 ‘‘(7) transactions involving offers or sales of eq8 uity securities, in connection with the acquisition of

9 a bank by a company under section 3(a) of the Bank

10 Holding Company Act of 1956, if—

11 ‘‘(A) the acquisition occurs solely as part of

12 a reorganization in which a person or group of

13 persons exchanges its shares of a bank for shares

14 of a newly formed bank holding company with

15 no significant assets other than securities of the

16 bank and the existing subsidiaries of the bank;

17 ‘‘(B) the shareholders receive, after that re18 organization, substantially the same propor19 tional share interests in the bank holding com20 pany as they held in the bank, except for changes

21 in shareholders’ interests resulting from lawful

22 elimination of fractional interests and the exer23 cise of dissenting shareholders’ rights under State

24 or Federal law;

25 ‘‘(C) the rights and interests of security

26 holders in the bank holding company are sub-
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1 stantially the same as those in the bank prior to

2 the transaction, other than as may be required

3 by law; and

4 ‘‘(D) the bank holding company has sub5 stantially the same assets and liabilities as the

6 bank had prior to the transaction.’’.

7 SEC. 321. REDUCTION OF POST-APPROVAL WAITING PERIOD

8 FOR BANK HOLDING COMPANY ACQUISI9 TIONS.

10 Section 11(b)(1) of the Bank Holding Company Act

11 of 1956 (12 U.S.C. 1849(b)(1)) is amended by inserting be12 fore the period at the end of the fourth sentence the follow13 ing: ‘‘or, if the Board has not received any adverse comment

14 from the Attorney General of the United States relating to

15 competitive factors, such shorter period of time as may be

16 prescribed by the Board with the concurrence of the Attor17 ney General, but in no event less than 15 calendar days

18 after the date of approval’’.

19 SEC. 322. REDUCTION OF POST-APPROVAL WAITING PERIOD

20 FOR BANK MERGERS.

21 Section 18(c)(6) of the Federal Deposit Insurance Act

22 (12 U.S.C. 1828(c)(6)) is amended by inserting before the

23 period at the end of the last sentence the following: ‘‘or, if

24 the agency has not received any adverse comment from the

25 Attorney General of the United States relating to competi-
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1 tive factors, such shorter period of time as may be pre2 scribed by the agency with the concurrence of the Attorney

3 General, but in no event less than 15 calendar days after

4 the date of approval’’.

5 SEC. 323. BANKERS’ BANKS.

6 (a) OWNERSHIP BY BANKERS’ BANKS.—

7 (1) Paragraph Seventh of section 5136 of the Re8 vised Statutes (12 U.S.C. 24) is amended in the elev9 enth sentence—

10 (A) by inserting ‘‘or depository institution

11 holding companies (as defined in section 3 of the

12 Federal Deposit Insurance Act)’’ after ‘‘(except to

13 the extent directors’ qualifying shares are re14 quired by law) by depository institutions’’; and

15 (B) by striking ‘‘employees’’ and inserting

16 ‘‘employees (also referred to as a ‘bankers’

17 bank’)’’.

18 (2) Section 5169(b)(1) of the Revised Statutes

19 (12 U.S.C. 27(b)(1)) is amended—

20 (A) by inserting ‘‘or depository institution

21 holding companies’’ after ‘‘(except to the extent

22 directors’ qualifying shares are required by law)

23 by other depository institutions’’; and
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1 (B) by striking ‘‘employees’’ and inserting

2 ‘‘employees (also referred to as a ‘bankers’

3 bank’)’’.

4 (b) OWNERSHIP BY SAVINGS ASSOCIATIONS.—Section

5 5(c)(4) of the Home Owners’ Loan Act (12 U.S.C.

6 1464(c)(4)) is amended by adding at the end the following

7 new subparagraph:

8 ‘‘(E) BANKERS’ BANKS.—A Federal savings

9 association may purchase for its own account

10 shares of stock of a bankers’ bank, described in

11 Paragraph Seventh of section 5136 of the Revised

12 Statutes or in section 5169(b) of the Revised

13 Statutes, on the same terms and conditions as a

14 national bank may purchase such shares.’’.

15 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

16 (1) BANK HOLDING COMPANY ACT.—Section 3(e)

17 of the Bank Holding Company Act of 1956 (12

18 U.S.C. 1842(e)) is amended by striking the second

19 sentence.

20 (2) MANAGEMENT INTERLOCKS ACT.—Section

21 202(3)(D) of the Depository Institution Management

22 Interlocks Act (12 U.S.C. 3201(3)(D)) is amended by

23 striking ‘‘the voting securities’’ and all that follows

24 through the end of the subparagraph and inserting
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1 ‘‘and is a bankers’ bank, described in Paragraph Sev2 enth of section 5136 of the Revised Statutes; or’’.

3 SEC. 324. BANK SERVICE CORPORATION ACT AMENDMENT.

4 Section 5 of the Bank Service Corporation Act (12

5 U.S.C. 1865) is amended—

6 (1) in subsection (a), by striking ‘‘the prior ap7 proval of’’ and inserting ‘‘prior notice, as determined

8 by’’; and

9 (2) in subsection (c), by inserting ‘‘or whether to

10 approve or disapprove any notice’’ after ‘‘approval’’.

11 SEC. 325. MERGER TRANSACTION REPORTS.

12 Section 18(c) of the Federal Deposit Insurance Act (12

13 U.S.C. 1828(c)) is amended—

14 (1) in paragraph (4)—

15 (A) in the first sentence—

16 (i) by striking ‘‘General and the other

17 two’’ and inserting ‘‘General, who shall

18 promptly notify the other’’; and

19 (ii) by inserting before the period ‘‘of

20 any such proposed transaction that raises a

21 significant competitiveness issue’’; and

22 (B) in the second sentence, by striking ‘‘and

23 the other two banking agencies’’; and

24 (2) in paragraph (6), by striking ‘‘and the other

25 two banking agencies’’.
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1 SEC. 326. CREDIT CARD ACCOUNTS RECEIVABLE SALES.

2 Section 11(e) of the Federal Deposit Insurance Act (12

3 U.S.C. 1821(e)) is amended by adding at the end the follow4 ing new paragraphs:

5 ‘‘(14) SELLING CREDIT CARD ACCOUNTS RECEIV6 ABLE.—

7 ‘‘(A) NOTIFICATION REQUIRED.—An

8 undercapitalized insured depository institution

9 (as defined in section 38) shall notify the Cor10 poration in writing before entering into an

11 agreement to sell credit card accounts receivable.

12 ‘‘(B) WAIVER BY CORPORATION.—The Cor13 poration may at any time, in its sole discretion

14 and upon such terms as it may prescribe, waive

15 its right to repudiate an agreement to sell credit

16 card accounts receivable if the Corporation—

17 ‘‘(i) determines that the waiver is in

18 the best interests of the deposit insurance

19 fund; and

20 ‘‘(ii) provides a written waiver to the

21 selling institution.

22 ‘‘(C) EFFECT OF WAIVER ON SUCCES23 SORS.—

24 ‘‘(i) IN GENERAL.—If, under subpara25 graph (B), the Corporation has waived its
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1 right to repudiate an agreement to sell cred2 it card accounts receivable—

3 ‘‘(I) any provision of the agree4 ment that restricts solicitation of a

5 credit card customer of the selling in6 stitution, or the use of a credit card

7 customer list of the institution, shall

8 bind any receiver or conservator of the

9 institution; and

10 ‘‘(II) the Corporation shall re11 quire any acquirer of the selling insti12 tution, or of substantially all of the

13 selling institution’s assets or liabilities,

14 to agree to be bound by a provision de15 scribed in subclause (I) as if the

16 acquirer were the selling institution.

17 ‘‘(ii) EXCEPTION.—Clause (i)(II) does

18 not—

19 ‘‘(I) restrict the acquirer’s author20 ity to offer any product or service to

21 any person identified without using a

22 list of the selling institution’s cus23 tomers in violation of the agreement;
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1 ‘‘(II) require the acquirer to re2 strict any preexisting relationship be3 tween the acquirer and a customer; or

4 ‘‘(III) apply to any transaction

5 in which the acquirer acquires only in6 sured deposits.

7 ‘‘(D) WAIVER NOT ACTIONABLE.—The Cor8 poration shall not, in any capacity, be liable to

9 any person for damages resulting from the waiv10 er of or failure to waive the Corporation’s right

11 under this section to repudiate any contract or

12 lease, including an agreement to sell credit card

13 accounts receivable. No court shall issue any

14 order affecting any such waiver or failure to

15 waive.

16 ‘‘(E) OTHER AUTHORITY NOT AFFECTED.—

17 This paragraph does not limit any other author18 ity of the Corporation to waive the Corporation’s

19 right to repudiate an agreement or lease under

20 this section.

21 ‘‘(15) CERTAIN CREDIT CARD CUSTOMER LISTS

22 PROTECTED.—

23 ‘‘(A) IN GENERAL.—If any insured deposi24 tory institution sells credit card accounts receiv25 able under an agreement negotiated at arm’s
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1 length that provides for the sale of the institu2 tion’s credit card customer list, the Corporation

3 shall prohibit any party to a transaction with

4 respect to the institution under this section or

5 section 13 from using the list except as permitted

6 under the agreement.

7 ‘‘(B) FRAUDULENT TRANSACTIONS EX8 CLUDED.—Subparagraph (A) does not limit the

9 Corporation’s authority to repudiate any agree10 ment entered into with the intent to hinder,

11 delay, or defraud the institution, the institution’s

12 creditors, or the Corporation.’’.

13 SEC. 327. LIMITING POTENTIAL LIABILITY ON FOREIGN AC14 COUNTS.

15 (a) AMENDMENT TO THE FEDERAL RESERVE ACT.—

16 The Federal Reserve Act (12 U.S.C. 221 et seq.) is amended

17 by inserting after section 25B the following new section:

18 ‘‘SEC. 25C. POTENTIAL LIABILITY ON FOREIGN ACCOUNTS.

19 ‘‘A member bank shall not be required to repay any

20 deposit made at a foreign branch of the bank if the branch

21 cannot repay the deposit due to—

22 ‘‘(1) an act of war, insurrection or civil strife;

23 or
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1 ‘‘(2) an action by a foreign government or in2 strumentality (whether de jure or de facto) in the

3 country in which the branch is located,

4 unless the member bank has expressly agreed in writing to

5 repay the deposit under those circumstances. The Board

6 may prescribe such regulations as it deems necessary to im7 plement this section.’’.

8 (b) CONFORMING AMENDMENTS TO THE FEDERAL DE9 POSIT INSURANCE ACT.—

10 (1) IN GENERAL.—Section 18 of the Federal De11 posit Insurance Act (12 U.S.C. 1828) is amended by

12 adding at the end the following new subsection:

13 ‘‘(q) SOVEREIGN RISK.—Section 25C of the Federal

14 Reserve Act shall apply to every nonmember insured bank

15 in the same manner and to the same extent as if the

16 nonmember insured bank were a member bank.’’.

17 (2) CONFORMING AMENDMENT.—Subparagraph

18 (A) of section 3(l)(5) of the Federal Deposit Insurance

19 Act (12 U.S.C. 1813(l)(5)) is amended to read as fol20 lows:

21 ‘‘(A) any obligation of a depository institu22 tion which is carried on the books and records of

23 an office of such bank or savings association lo24 cated outside of any State, unless—
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1 ‘‘(i) such obligation would be a deposit

2 if it were carried on the books and records

3 of the depository institution, and would be

4 payable at, an office located in any State;

5 and

6 ‘‘(ii) the contract evidencing the obliga7 tion provides by express terms, and not by

8 implication, for payment at an office of the

9 depository institution located in any State;

10 and’’.

11 (c) EXISTING CLAIMS NOT AFFECTED—Section 25C of

12 the Federal Reserve Act (as added by subsection (a)) shall

13 not be applied retroactively and shall not be construed to

14 affect or apply to any claim or cause of action addressed

15 by that section arising from events or circumstances that

16 occurred before the date of enactment of this Act.

17 SEC. 328. AMENDMENTS TO OUTDATED DIVIDEND PROVI18 SIONS.

19 (a) WITHDRAWAL OF CAPITAL.—Section 5204 of the

20 Revised Statutes (12 U.S.C. 56) is amended—

21 (1) in the second sentence, by striking ‘‘net prof22 its then on hand, deducting therefrom its losses and

23 bad debts’’ and inserting ‘‘undivided profits, subject

24 to other applicable provisions of law’’; and

25 (2) by striking the third sentence.
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1 (b) DECLARATION OF DIVIDENDS.—Section 5199 of the

2 Revised Statutes (12 U.S.C. 60) is amended—

3 (1) in the first sentence, by striking ‘‘net profits

4 of the association’’ and inserting ‘‘undivided profits

5 of the association, subject to the limitations in sub6 section (b),’’;

7 (2) by striking ‘‘net profits’’ each subsequent

8 place such term appears and inserting ‘‘net income’’;

9 and

10 (3) by striking subsection (c).

11 SEC. 329. ELIMINATION OF DUPLICATIVE DISCLOSURES

12 FOR HOME EQUITY LOANS.

13 Section 4(a) of the Real Estate Settlement Procedures

14 Act (12 U.S.C. 2603(a)) is amended by adding at the end

15 the following: ‘‘In the case of a federally related mortgage

16 loan secured by a subordinate lien on residential property,

17 disclosures made under section 127A(a) of the Truth in

18 Lending Act may be used in lieu of the disclosures required

19 under this section if—

20 ‘‘(1) the disclosures made pursuant to such sec21 tion 127A(a) contain all of the information that is re22 quired under this section; and

23 ‘‘(2) the information is disclosed in a manner

24 that is no less conspicuous than is required under this

25 section.’’.
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1 SEC. 330. REPORT ON CAPITAL STANDARDS AND THEIR IM2 PACT ON THE ECONOMY.

3 (a) IN GENERAL.—Not later than 1 year after the date

4 of enactment of this Act, the Secretary of the Treasury, after

5 consultation with the Federal banking agencies, shall report

6 to the Committee on Banking, Housing, and Urban Affairs

7 of the Senate and the Committee on Banking, Finance and

8 Urban Affairs of the House of Representatives on the effect

9 of the implementation of risk-based capital standards on—

10 (1) the safety and soundness of insured deposi11 tory institutions; and

12 (2) the availability of credit, particularly to con13 sumers and small business concerns.

14 (b) RECOMMENDATIONS.—The report required by sub15 section (a) shall contain any recommendations that the Sec16 retary of the Treasury considers relevant.

17 SEC. 331. STUDIES ON THE IMPACT OF THE PAYMENT OF IN18 TEREST ON RESERVES.

19 (a) FEDERAL RESERVE STUDY.—Not later than 180

20 days after the date of enactment of this Act, the Board of

21 Governors of the Federal Reserve System, in consultation

22 with the Federal Deposit Insurance Corporation, shall con23 duct a study and report to Congress on—

24 (1) the necessity, for monetary policy purposes,

25 of continuing to require insured depository institu26 tions to maintain sterile reserves;
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1 (2) the appropriateness of paying a market rate

2 of interest to insured depository institutions on sterile

3 reserves or, in the alternative, providing for payment

4 of such interest into the appropriate deposit insur5 ance fund;

6 (3) the monetary impact that the failure to pay

7 interest on sterile reserves has had on insured deposi8 tory institutions, including an estimate of the total

9 dollar amount of interest and the potential income

10 lost by insured depository institutions; and

11 (4) the impact that the failure to pay interest on

12 sterile reserves has had on the ability of the banking

13 industry to compete with nonbanking providers of fi14 nancial services and with foreign banks.

15 (b) BUDGETARY IMPACT STUDY.—Not later than 180

16 days after the date of enactment of this Act, the Director

17 of the Office of Management and Budget and the Director

18 of the Congressional Budget Office, in consultation with the

19 Committees on the Budget of the Senate and the House of

20 Representatives, shall jointly conduct a study and report

21 to the Congress on the budgetary impact of—

22 (1) paying a market rate of interest to insured

23 depository institutions on sterile reserves; and

24 (2) paying such interest into the respective

25 deposit insurance funds.
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1 SEC. 332. STUDY AND REPORT ON STREAMLINED LENDING

2 PROCESS FOR CONSUMER BENEFIT.

3 (a) STUDY.—During the 12-month period beginning

4 on the date of enactment of this Act, the Board of Governors

5 of the Federal Reserve System, the Comptroller of the Cur6 rency, and the Secretary of Housing and Urban Develop7 ment shall conduct a study of ways to improve the home

8 mortgage, small business, and consumer lending processes,

9 consistent with the principles of safety and soundness, so

10 as to—

11 (1) reduce consumer burdens, inconvenience, cost,

12 and delay; and

13 (2) minimize cost and burdens on insured

14 depository institutions, credit unions, and other

15 lenders.

16 (b) COMMENTS.—In conducting the study under sub17 section (a), comments shall be solicited from consumer

18 groups, insured depository institutions, other lenders, and

19 any other interested parties.

20 (c) REPORT.—Not later than 12 months after the date

21 of enactment of this Act, the Board of Governors of the Fed22 eral Reserve System, the Comptroller of the Currency, and

23 the Secretary of Housing and Urban Development shall sub24 mit a joint report to the Congress indicating any legislative

25 changes necessary to improve the home mortgage, small
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1 business, and consumer lending processes and including a

2 summary of comments received pursuant to subsection (b).

3 SEC. 333. REPEAL OF OUTDATED CHARTER REQUIREMENT

4 FOR NATIONAL BANKS.

5 Section 5170 of the Revised Statutes (12 U.S.C. 28)

6 is repealed.

7 Amend the title so as read: ‘‘A bill to facilitate the

8 establishment of community development financial institu9 tions, to provide consumer protections for high cost mort10 gages, to encourage investment in and lending to small

11 businesses, to improve the regulation of depository institu12 tions, and for other purposes.’’.

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