I

103D CONGRESS

2D SESSION H. R. 3853

To stimulate private investment, economic development, and the creation

of jobs in the private sector by authorizing the Secretary of the Treasury

to participate in loans, and guarantee a portion of loans, made by

banks and other qualified lenders for businesses with potential for expansion and growth and for other viable economic development projects,

and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 10, 1994

Mr. KLEIN (for himself, Mr. FRANK of Massachusetts, Mr. SCHUMER, and

Mr. DEUTSCH) introduced the following bill; which was referred to the

Committee on Banking, Finance and Urban Affairs

A BILL

To stimulate private investment, economic development, and

the creation of jobs in the private sector by authorizing

the Secretary of the Treasury to participate in loans,

and guarantee a portion of loans, made by banks and

other qualified lenders for businesses with potential for

expansion and growth and for other viable economic development projects, and for other purposes.

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

2 This Act may be cited as the ‘‘Economic Revitaliza3 tion Act of 1994’’.

4 SEC. 2. PARTICIPATION AND COOPERATION BETWEEN PUB5 LIC AND PRIVATE SECTORS TO STIMULATE

6 ECONOMIC DEVELOPMENT.

7 (a) IN GENERAL.—Title 31, United States Code, is

8 amended by redesignating subtitle VI as subtitle IX and

9 by inserting after subtitle V the following new subtitle:

10 ‘‘Subtitle VI—Cooperation Between

11 Public and Private Sectors

‘‘CHAPTER Sec.

‘‘75. Cooperative Economic Growth and Development Financing ........... 7501

12 ‘‘CHAPTER 75—COOPERATIVE ECONOMIC

13 GROWTH AND DEVELOPMENT FINANCING

‘‘Sec.

‘‘7501. Definitions.

‘‘7502. Financial participation.

‘‘7503. Financing.

‘‘7504. Participating financial institutions.

14 ‘‘§ 7501. Definitions

15 ‘‘For purposes of this chapter—

16 ‘‘(1) PARTICIPATING FINANCIAL INSTITU17 TION.—The term ‘participating financial institution’

18 means any depository institution (as defined in sec19 tion 19(b)(1)(A) of the Federal Reserve Act) or

20 other lending institution—
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1 ‘‘(A) which meets such criteria as the Sec2 retary may establish for participating in any co3 operative economic growth and development fi4 nancing project established by the Secretary

5 under this chapter; and

6 ‘‘(B) whose application to participate as a

7 lender in any such project, subject to such con8 ditions as the Secretary may prescribe, is ap9 proved by the Secretary.

10 ‘‘(2) QUALIFIED LOAN.—The term ‘qualified

11 loan’ means a loan which—

12 ‘‘(A) is made to a business which—

13 ‘‘(i) is in good financial condition;

14 ‘‘(ii) has a strong potential for expan15 sion and growth; and

16 ‘‘(iii) is experiencing difficulty in ob17 taining sufficient amounts of credit on

18 terms which are economically viable for

19 such business due to prevailing economic

20 conditions or other circumstances unre21 lated to the financial condition of the busi22 ness;

23 ‘‘(B) is made for purposes which the Sec24 retary determines will—
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1 ‘‘(i) produce a significant net increase

2 in the number of jobs relative to the total

3 amount of the loan; and

4 ‘‘(ii) stimulate economic growth in a

5 region or community in which such busi6 ness is located; and

7 ‘‘(C) meets such underwriting standards

8 and other criteria as the Secretary determines

9 to be appropriate.

10 ‘‘(3) SECRETARY.—The term ‘Secretary’ means

11 the Secretary of the Treasury.

12 ‘‘§ 7502. Financial participation

13 ‘‘(a) LOAN PARTICIPATIONS AND GUARANTEES.—

14 ‘‘(1) IN GENERAL.—Subject to subsections (b)

15 and (d), the Secretary may—

16 ‘‘(A) purchase a participation in any quali17 fied loan made by a participating financial in18 stitution; and

19 ‘‘(B) guarantee the payment of interest on,

20 and the repayment of principal of, a portion of

21 any qualified loan made by a participating fi22 nancial institution.

23 ‘‘(2) TERMS AND CONDITIONS.—The Secretary

24 may establish such terms and conditions for a loan

25 participation or loan guarantee under paragraph (1)
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1 as the Secretary determines to be appropriate, in2 cluding—

3 ‘‘(A) minimum and maximum limitations

4 on the amount of any qualified loan which is el5 igible for any such participation or guarantee;

6 and

7 ‘‘(B) in the case of a loan guarantee with

8 respect to any qualified loan, a requirement

9 that the participating financial institution which

10 originated the loan maintain a prescribed

11 amount of reserves with respect to the loan or

12 retain a subordinated participating interest in

13 the loan.

14 ‘‘(3) FEES.—The Secretary may impose a fee

15 in such amount as the Secretary determines to be

16 appropriate for any loan participation or loan guar17 antee made by the Secretary under this section to

18 cover the costs incurred by the Secretary in carrying

19 out this subsection.

20 ‘‘(b) MAXIMUM AMOUNT LIMITATIONS ON PARTICI21 PATIONS AND GUARANTEES.—

22 ‘‘(1) LOAN PARTICIPATIONS.—Except with re23 spect to the purchase of loans in connection with the

24 securitization of qualified loans in accordance with

25 subsection (c), the amount of any loan participation
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1 or other interest in any qualified loan acquired by

2 the Secretary under this chapter may not exceed the

3 amount which is equal to 70 percent of the total

4 amount of the loan.

5 ‘‘(2) LOAN GUARANTEES.—The amount of any

6 guarantee made by the Secretary under subsection

7 (a)(2) with respect to any qualified loan may not ex8 ceed 50 percent of the amount which is equal to—

9 ‘‘(A) the total principal of the loan; minus

10 ‘‘(B) the amount of any participation in

11 such loan which the Secretary has acquired.

12 ‘‘(c) SECURITIZATION OF QUALIFIED LOANS.—

13 ‘‘(1) IN GENERAL.—The Secretary may issue

14 securities backed by a pool of qualified loans ac15 quired by the Secretary for such purpose.

16 ‘‘(2) SECURITIES NOT BACKED BY FULL FAITH

17 AND CREDIT OF THE UNITED STATES.—

18 ‘‘(A) IN GENERAL.—A security issued by

19 the Secretary under paragraph (1) shall not be

20 an obligation of the United States, or guaran21 teed in any respect by, the United States.

22 ‘‘(B) COORDINATION WITH LOAN GUARAN23 TEES.—A loan guarantee provided by the Sec24 retary with respect to any portion of a qualified

25 loan shall cease to be effective at the time the
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1 loan is acquired by the Secretary for inclusion

2 in a pool of qualified loans under paragraph

3 (1).

4 ‘‘(3) STANDARDS.—The Secretary shall estab5 lish standards governing the composition of a pool of

6 qualified loans under paragraph (1), including

7 standards requiring—

8 ‘‘(A) a broad geographical distribution of

9 the businesses which received the loans which

10 are in the pool;

11 ‘‘(B) a diversity in the types of businesses

12 which received the loans and in the purposes for

13 which the loans were made;

14 ‘‘(C) a wide variety in the amounts of prin15 cipal of the qualified loans included in the pool;

16 and

17 ‘‘(D) a large number of loans in the pool.

18 ‘‘(4) MAXIMUM SIZE OF LOAN INCLUDIBLE IN

19 POOL.—In order to be included in a pool under

20 paragraph (1), the total amount of principal of a

21 qualified loan may not exceed an amount equal to 10

22 percent of the total amount of all loans in such pool.

23 ‘‘(5) AUTHORITY TO PURCHASE QUALIFIED

24 LOANS FOR INCLUSION IN POOL.—Subject to sub-
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1 section (d), the Secretary may purchase qualified

2 loans for inclusion in a pool under paragraph (1).

3 ‘‘(d) ANNUAL LIMITATION ON AGGREGATE AMOUNT

4 OF LOANS AND GUARANTEES.—

5 ‘‘(1) LOAN PARTICIPATIONS.—The aggregate

6 amount of qualified loan participations acquired by

7 the Secretary and the amount of qualified loans pur8 chased by the Secretary for inclusion in a pool under

9 subsection (c) shall not exceed $100,000 in any fis10 cal year.

11 ‘‘(2) LOAN GUARANTEES.—The aggregate

12 amount of guarantees issued by the Secretary with

13 respect to qualified loans shall not exceed $200,000

14 in any fiscal year.

15 ‘‘§ 7503. Financing

16 ‘‘(a) BOND AUTHORITY.—

17 ‘‘(1) IN GENERAL.—In order to obtain addi18 tional resources to carry out section 7503 at no ex19 pense to the Federal Government or the taxpayer,

20 the Secretary may issue bonds in accordance with

21 this section to obtain additional resources to carry

22 out section 7503.

23 ‘‘(2) PRIVATE GUARANTEE.—The Secretary

24 may not issue a bond under paragraph (1) unless

25 (a) the issuance is fully guaranteed by a financial in-
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1 stitution which has the highest credit rating of any

2 financial institution in the United States by at least

3 1 unaffiliated, nationally recognized statistical rating

4 organization or (b) the loan obligation is insured or

5 underwritten by a letter of credit or credit insurance

6 issued by a financial institution which has the high7 est credit rating of any financial institution in the

8 United States by at least 1 unaffiliated, nationally

9 statistical rating organization.

10 ‘‘(3) TERMS AND CONDITIONS IMPOSED BY UN11 DERWRITER.—Except to the extent otherwise pro12 vided in this chapter, the Secretary shall comply

13 with any term or condition imposed by an under14 writer in connection with the issuance of any bond

15 under paragraph (1).

16 ‘‘(4) SECURITIES NOT BACKED BY FULL FAITH

17 AND CREDIT OF THE UNITED STATES.—A bond is18 sued by the Secretary under paragraph (1) shall not

19 be an obligation of the United States, or guaranteed

20 in any respect by, the United States.

21 ‘‘§ 7504. Participating financial institutions

22 ‘‘(a) STANDARDS AND APPLICATION PROCESS.—The

23 Secretary shall establish standards and application proce24 dures for the designation of participating financial institu25 tions for purposes of this chapter.
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1 ‘‘(b) ADVERTISING AND PUBLIC NOTICE.—The Sec2 retary shall provide advertising and public notices, and

3 take such other actions as the Secretary determines to be

4 appropriate, to publicize—

5 ‘‘(1) the existence of the cooperative financial

6 participation projects established under this chapter;

7 and

8 ‘‘(2) the names and addresses of the participat9 ing financial institutions involved in such cooperative

10 projects.’’.

11 (b) CLERICAL AMENDMENT.—The table of subtitles

12 for title 31, United States Code, is amended by redesignat13 ing the item relating to subtitle VI as subtitle IX and by

14 inserting after the item relating to subtitle V the following

15 new item:

‘‘VI. Cooperation Between Public and Private Sectors ...... 7501’’.

Æ