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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5297 Introduced in House (IH)]

111th CONGRESS
  2d Session
                                H. R. 5297

    To create the Small Business Lending Fund Program to direct the 
   Secretary of the Treasury to make capital investments in eligible 
institutions in order to increase the availability of credit for small 
                  businesses, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 13, 2010

Mr. Frank of Massachusetts (for himself, Ms. Waters, Mrs. Maloney, Mr. 
 Gutierrez, Mr. Watt, Mr. Moore of Kansas, Mr. Hinojosa, Mr. Meeks of 
 New York, Mr. Miller of North Carolina, Mr. Scott of Georgia, Mr. Al 
  Green of Texas, Ms. Bean, Ms. Moore of Wisconsin, Mr. Ellison, Mr. 
  Klein of Florida, Mr. Perlmutter, Mr. Peters, Mr. Maffei, and Mrs. 
 Dahlkemper) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL

 
    To create the Small Business Lending Fund Program to direct the 
   Secretary of the Treasury to make capital investments in eligible 
institutions in order to increase the availability of credit for small 
                  businesses, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Lending Fund Act of 
2010''.

SEC. 2. PURPOSE.

    The purpose of this Act is to address the ongoing effects of the 
financial crisis on small businesses by providing temporary authority 
to the Secretary of the Treasury to make capital investments in 
eligible institutions in order to increase the availability of credit 
for small businesses.

SEC. 3. DEFINITIONS.

    For purposes of this Act:
            (1) Appropriate committees of congress.--The term 
        ``appropriate committees of Congress'' means--
                    (A) the Committee on Small Business and 
                Entrepreneurship, the Committee on Agriculture, 
                Nutrition, and Forestry, the Committee on Banking, 
                Housing, and Urban Affairs, the Committee on Finance, 
                the Committee on the Budget, and the Committee on 
                Appropriations of the Senate; and
                    (B) the Committee on Small Business, the Committee 
                on Agriculture, the Committee on Financial Services, 
                the Committee on Ways and Means, the Committee on the 
                Budget, and the Committee on Appropriations of the 
                House of Representatives.
            (2) Appropriate federal banking agency.--The term 
        ``appropriate Federal banking agency'' has the meaning given 
        such term under section 3(q) of the Federal Deposit Insurance 
        Act (12 U.S.C. 1813(q)).
            (3) Bank holding company.--The term ``bank holding 
        company'' has the meaning given such term under section 2(a)(1) 
        of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1841(2)(a)(1)).
            (4) Call report.--The term ``call report'' means--
                    (A) reports of Condition and Income submitted to 
                the Office of the Comptroller of the Currency, the 
                Board of Governors of the Federal Reserve System, and 
                the Federal Deposit Insurance Corporation;
                    (B) the Office of Thrift Supervision Thrift 
                Financial Report; and
                    (C) any report that is designated by the Office of 
                the Comptroller of the Currency, the Board of Governors 
                of the Federal Reserve System, the Federal Deposit 
                Insurance Corporation, or the Office of Thrift 
                Supervision, as applicable, as a successor to any 
                report referred to in subparagraph (A) or (B).
            (5) CDCI.--The term ``CDCI'' means the Community 
        Development Capital Investment program created by the Secretary 
        under the Troubled Asset Relief Program established by the 
        Emergency Economic Stabilization Act of 2008.
            (6) CDCI investment.--The term ``CDCI investment'' means, 
        with respect to any eligible institution, the principal amount 
        of any investment made by the Secretary in such eligible 
        institution under the CDCI that has not been repaid.
            (7) CPP.--The term ``CPP'' means the Capital Purchase 
        Program created by the Secretary under the Troubled Asset 
        Relief Program established by the Emergency Economic 
        Stabilization Act of 2008.
            (8) CPP investment.--The term ``CPP investment'' means, 
        with respect to any eligible institution, the principal amount 
        of any investment made by the Secretary in such eligible 
        institution under the CPP that has not been repaid.
            (9) Eligible institution.--The term ``eligible 
        institution'' means--
                    (A) any insured depository institution, which--
                            (i) is not controlled by a bank holding 
                        company or savings and loan holding company 
                        that is also an eligible institution;
                            (ii) has total assets of equal to or less 
                        than $10,000,000,000, as reported in the call 
                        report as of the end of the fourth quarter of 
                        calendar year 2009; and
                            (iii) is not directly or indirectly 
                        controlled by any company or other entity that 
                        has total assets of equal to or less than 
                        $10,000,000,000, as so reported;
                    (B) any bank holding company, which--
                            (i) has total assets of equal to or less 
                        than $10,000,000,000; and
                            (ii) has one or more insured depository 
                        institution subsidiaries that have combined 
                        total assets of equal to or less than 
                        $10,000,000,000, as reported in the call report 
                        of each insured depository institution 
                        subsidiary as of the end of the fourth quarter 
                        of calendar year 2009; and
                    (C) any savings and loan holding company, which--
                            (i) has total assets of equal to or less 
                        than $10,000,000,000; and
                            (ii) has one or more insured depository 
                        institution subsidiaries that have total assets 
                        of equal to or less than $10,000,000,000, as 
                        reported in the call report of each insured 
                        depository institution subsidiary as of the end 
                        of the fourth quarter of calendar year 2009.
            (10) Fund.--The term ``Fund'' means the Small Business 
        Lending Fund established by section 4(a)(1) of this Act.
            (11) Insured depository institution.--The term ``insured 
        depository institution'' has the meaning given such term under 
        section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
        1813(c)(2)).
            (12) Program.--The term ``Program'' means the Small 
        Business Lending Fund Program authorized by section 4(a)(2) of 
        this Act.
            (13) Savings and loan holding company.--The term ``savings 
        and loan holding company'' has the meaning given such term 
        under section 10(a)(1)(D) of the Home Owners' Loan Act (12 
        U.S.C. 1467a(a)(1)(D)).
            (14) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (15) Small business lending.--The term ``small business 
        lending'' means--
                    (A) commercial and industrial loans plus owner-
                occupied nonfarm, nonresidential real estate loans;
                    (B) loans to finance agricultural production and 
                other loans to farmers; and
                    (C) loans secured by farmland, as defined by and 
                reported in an eligible institution's quarterly call 
                report.
        In the case of eligible institutions that are bank holding 
        companies or savings and loan holding companies having one or 
        more insured depository institution subsidiaries, small 
        business lending shall be measured based on the combined small 
        business lending reported in the call report of the insured 
        depository institution subsidiaries.

SEC. 4. SMALL BUSINESS LENDING FUND.

    (a) Fund and Program.--
            (1) Fund established.--There is established in the Treasury 
        of the United States a fund to be known as the ``Small Business 
        Lending Fund'', which shall be administered by the Secretary.
            (2) Programs authorized.--The Secretary is authorized to 
        establish the Small Business Lending Fund Program for using the 
        Fund consistent with this Act, and a program for the allocation 
        of Federal funds to participating States to expand the 
        availability of credit to small businesses.
    (b) Use of Fund.--
            (1) In general.--Subject to paragraph (2), the Fund shall 
        be available to the Secretary, without further appropriation or 
        fiscal year limitation, for the costs of purchases (including 
        commitments to purchase), and modifications of such purchases, 
        of preferred stock and other financial instruments from 
        eligible institutions on such terms and conditions as are 
        determined by the Secretary in accordance with this Act.
            (2) Maximum purchase limit.--The aggregate amount of 
        purchases (and commitments to purchase) made pursuant to 
        paragraph (1) may not exceed $30,000,000,000.
    (c) Credits to the Fund.--There shall be credited to the Fund 
amounts made available pursuant to section 9, to the extent provided by 
appropriations Acts.
    (d) Terms.--
            (1) Application.--
                    (A) Eligible institutions having total assets equal 
                to or less than $1,000,000,000, as reported in a call 
                report as of the end of the fourth quarter of calendar 
                year 2009, may apply to receive a capital investment 
                from the Fund in an amount not exceeding 5 percent of 
                risk-weighted assets, as reported in the call report 
                immediately preceding the date of application, less the 
                amount of any CDCI investment and any CPP investment.
                    (B) Eligible institutions having total assets of 
                more than $1,000,000,000 but less than $10,000,000,000, 
                as of the end of the fourth quarter of calendar year 
                2009, may apply to receive a capital investment from 
                the Fund in an amount not exceeding 3 percent of risk-
                weighted assets, as reported in the call report 
                immediately preceding the date of application, less the 
                amount of any CDCI investment and any CPP investment.
                    (C) In the case of an eligible institution that is 
                a bank holding company or a savings and loan holding 
                company having one or more insured depository 
                institution subsidiaries, total assets shall be 
                measured based on the combined total assets reported in 
                the call report of the insured depository institution 
                subsidiaries as of the end of the fourth quarter of 
                calendar year 2009 and risk-weighted assets shall be 
                measured based on the combined risk-weighted assets of 
                the insured depository institution subsidiaries as 
                reported in the call report immediately preceding the 
                date of application.
                    (D) If an eligible institution that applies to 
                receive a capital investment under the Program is under 
                the control of a bank holding company or a savings and 
                loan holding company, then the Secretary may use the 
                Small Business Lending Fund to purchase preferred stock 
                or other financial instruments from the top-tier bank 
                holding company or savings and loan holding company of 
                such eligible institution, as applicable. For purposes 
                of this paragraph, the term ``control'' with respect to 
                a bank holding company shall have the same meaning as 
                in section 2(a)(2) of the Bank Holding Company Act of 
                1956 (12 U.S.C. 1841(2)(a)(2)). For purposes of this 
                paragraph, the term ``control'' with respect to a 
                savings and loan holding company shall have the same 
                meaning as in 10(a)(2) of the Home Owners' Loan Act (12 
                U.S.C. 1467a(a)(2)).
                    (E) At the time that an applicant submits an 
                application to the Secretary for a capital investment 
                under the Program, the applicant shall deliver to the 
                appropriate Federal banking agency a small business 
                lending plan describing how the applicant's business 
                strategy and operating goals will allow it to address 
                the needs of small businesses in the areas it serves. 
                This plan shall be confidential supervisory 
                information.
            (2) Consultation with regulators.--For each eligible 
        institution that applies to receive a capital investment under 
        the Program, the Secretary shall consult with the appropriate 
        Federal banking agency for the eligible institution to 
        determine whether the eligible institution may receive such 
        capital investment.
            (3) Limitation on denial.--The Secretary may not deny an 
        application by an eligible institution for a capital investment 
        under the Program solely on the basis of the composite rating 
        of the eligible institution under the Uniform Financial 
        Institutions Rating System (or an equivalent rating under a 
        comparable rating system).
            (4) Incentives to lend.--
                    (A) Any preferred stock or other financial 
                instrument issued to Treasury by an eligible 
                institution receiving a capital investment under the 
                Program shall provide that--
                            (i) the rate at which dividends or interest 
                        are payable shall be 5 percent per annum 
                        initially;
                            (ii) within the first 2 years after the 
                        date of the capital investment under the 
                        Program, the rate may be adjusted based on the 
                        amount of an eligible institution's small 
                        business lending. Changes in small business 
                        lending shall be measured against the amount of 
                        small business lending reported by the eligible 
                        institution in its call report for the last 
                        quarter in calendar year 2009 or the average 
                        amount of small business lending reported by 
                        the eligible institution in all call reports 
                        for calendar year 2009, whichever is lower, 
                        minus adjustments from each quarterly balance 
                        in respect of--
                                    (I) net loan charge offs with 
                                respect to small business lending; and
                                    (II) gains realized by the eligible 
                                institution resulting from mergers, 
                                acquisitions or purchases of loans 
                                after origination and syndication; 
                                which adjustments shall be determined 
                                in accordance with guidance promulgated 
                                by the Secretary; and
                            (iii) during any calendar quarter during 
                        the initial 2-year period referred to in clause 
                        (ii), an institution's rate shall be adjusted 
                        to reflect the following schedule, based on 
                        that institution's change in small business 
                        lending relative to the baseline--
                                    (I) if small business lending has 
                                increased by less than 2.5 percent, the 
                                dividend or interest rate shall be 5 
                                percent;
                                    (II) if small business lending has 
                                increased by 2.5 percent or greater, 
                                but by less than 5.0 percent, the 
                                dividend or interest rate shall be 4 
                                percent;
                                    (III) if small business lending has 
                                increased by 5.0 percent or greater, 
                                but by less than 7.5 percent, the 
                                dividend or interest rate shall be 3 
                                percent;
                                    (IV) if small business lending has 
                                increased by 7.5 percent or greater, 
                                and but by less than 10.0 percent, the 
                                dividend or interest rate shall be 2 
                                percent; or
                                    (V) if small business lending has 
                                increased by 10 percent or greater, the 
                                dividend or interest rate shall be 1 
                                percent.
                    (B) The initial dividend or interest rate shall be 
                based on call report data published in the quarter 
                immediately preceding the date of the capital 
                investment under the Program.
                    (C) Any rate adjustment shall occur in the calendar 
                quarter following the publication of call report data, 
                such that the rate based on call report data from any 
                one calendar quarter, which is published in the first 
                following calendar quarter, shall be adjusted in that 
                first following calendar quarter and payable in the 
                second following quarter.
                    (D) Generally, the rate based on call report data 
                from the eighth calendar quarter after the date of the 
                capital investment under the Program shall be payable 
                until the expiration of the 5-year period that begins 
                on the date of the investment. In the case where 
                lending has remained the same or decreased relative to 
                the institution's baseline in the eighth quarter after 
                the date of the capital investment under the Program, 
                the rate shall be 7 percent until the expiration of the 
                5-year period that begins on the date of the 
                investment.
                    (E) The dividend or interest rate paid on any 
                preferred stock or other financial instrument issued by 
                an eligible institution that receives a capital 
                investment under the Program shall increase to 9 
                percent at the end of the 5-year period that begins on 
                the date of the capital investment under the Program.
                    (F) The reduction in the dividend or interest rate 
                payable to Treasury by any eligible institution shall 
                be limited such that the rate reduction shall not apply 
                to an amount of the investment made by Treasury that is 
                greater than the increase in lending realized under 
                this program. The Secretary may issue guidelines that 
                will apply to new capital investments limiting the 
                amount of capital available to eligible institutions 
                consistent with this limitation.
                    (G) Before making a capital investment in an 
                eligible institution that is an S corporation or a 
                corporation organized on a mutual basis, the Secretary 
                may adjust the dividend or interest rate on the 
                financial instrument to be issued to the Secretary, 
                from the dividend or interest rate that would apply 
                under subparagraphs (A) through (F), to take into 
                account any differential tax treatment of securities 
                issued by such eligible institution. For purpose of 
                this subparagraph, the term ``S corporation'' has the 
                same meaning as in section 1361(a) of the Internal 
                Revenue Code of 1986.
            (5) Additional incentives to repay.--The Secretary may, by 
        regulation or guidance issued under section 5(9), establish 
        repayment incentives in addition to the incentive in paragraph 
        (4)(E) that will apply to new capital investments in a manner 
        that the Secretary determines to be consistent with the 
        purposes of this Act.
            (6) Capital purchase program refinance.--The Secretary 
        shall, in a manner that the Secretary determines to be 
        consistent with the purposes of this Act, issue regulations and 
        other guidance to permit eligible institutions to refinance 
        securities issued to Treasury under the CDCI and the CPP for 
        securities to be issued under the Program.
            (7) Additional terms.--The Secretary may, by regulation or 
        guidance issued under section 5(9), make modifications that 
        will apply to new capital investments in order to manage risks 
        associated with the administration of the Small Business 
        Lending Fund in a manner consistent with the purposes of this 
        Act.

SEC. 5. ADDITIONAL AUTHORITIES OF THE SECRETARY.

    The Secretary may take such actions as the Secretary deems 
necessary to carry out the authorities in this Act, including, without 
limitation, the following:
            (1) The Secretary may use the services of any agency or 
        instrumentality of the United States or component thereof on a 
        reimbursable basis, and any such agency or instrumentality or 
        component thereof is authorized to provide services as 
        requested by the Secretary using all authorities vested in or 
        delegated to that agency, instrumentality, or component.
            (2) The Secretary may enter into contracts, including 
        contracts for services authorized by section 3109 of title 5, 
        United States Code.
            (3) The Secretary may designate any bank, savings 
        association, trust company, or security broker or dealer as a 
        financial agent of the Federal Government and such institution 
        shall perform all such reasonable duties related to this Act as 
        financial agent of the Federal Government as may be required. 
        The Secretary shall have authority to amend existing agreements 
        with financial agents, entered into during the 2-year period 
        before the date of enactment of this Act, to perform reasonable 
        duties related to this Act.
            (4) The Secretary may exercise any rights received in 
        connection with any preferred stock or other financial 
        instruments or assets purchased or acquired pursuant to the 
        authorities granted under this Act.
            (5) The Secretary may manage any assets purchased under 
        this Act, including revenues and portfolio risks therefrom.
            (6) The Secretary may sell, dispose of, transfer, exchange 
        or enter into securities loans, repurchase transactions, or 
        other financial transactions in regard to, any preferred stock 
        or other financial instrument or asset purchased or acquired 
        under this Act, upon terms and conditions and at a price 
        determined by the Secretary.
            (7) The Secretary may manage or prohibit conflicts of 
        interest that may arise in connection with the administration 
        and execution of the authorities provided under this Act.
            (8) The Secretary may establish and use vehicles, subject 
        to supervision by the Secretary, to purchase, hold, and sell 
        preferred stock or other financial instruments and issue 
        obligations.
            (9) The Secretary may, in consultation with the 
        Administrator of the Small Business Administration, issue such 
        regulations and other guidance as may be necessary or 
        appropriate to define terms or carry out the authorities or 
        purposes of this Act.

SEC. 6. CONSIDERATIONS.

    In exercising the authorities granted in this Act, the Secretary 
shall take into consideration--
            (1) increasing the availability of credit for small 
        businesses;
            (2) providing funding to eligible institutions that serve 
        small businesses in low- and moderate-income, minority and 
        other underserved communities;
            (3) protecting and increasing American jobs;
            (4) ensuring that all eligible institutions may apply to 
        participate in the program established under this Act, without 
        discrimination based on geography;
            (5) providing transparency with respect to use of funds 
        provided under this Act; and
            (6) minimizing the cost to taxpayers of exercising the 
        authorities.

SEC. 7. REPORTS.

    The Secretary shall provide to the appropriate committees of 
Congress--
            (1) within 7 days of the end of each month commencing with 
        the first month in which transactions are made under the 
        Program, a written report describing all of the transactions 
        made during the reporting period pursuant to the authorities 
        granted under this Act; and
            (2) after the end of March and the end of September, 
        commencing September 30, 2010, a written report on all 
        projected costs and liabilities, all operating expenses, 
        including compensation for financial agents, and all 
        transactions made by the Fund.

SEC. 8. OVERSIGHT AND AUDITS.

    (a) Inspector General Oversight.--The Inspector General of the 
Department of the Treasury shall conduct, supervise, and coordinate 
audits and investigations of the purchase (and commitments to purchase) 
of preferred stock and other financial instruments under the Program.
    (b) GAO Audit.--The Comptroller General of the United States shall 
perform an annual audit of the Program and issue a report to the 
appropriate committees of Congress containing the results of such 
audit.

SEC. 9. CREDIT REFORM; FUNDING.

    (a) Credit Reform.--The cost of purchases of preferred stock and 
other financial instruments made as capital investments under this Act 
shall be determined as provided under the Federal Credit Reform Act of 
1990 (2 U.S.C. 661 et seq.).
    (b) Funds Made Available.--There are hereby authorized to be 
appropriated, out of funds in the Treasury not otherwise appropriated, 
such sums as may be necessary to pay the costs of $30,000,000,000 of 
capital investments in eligible institutions, including the costs of 
modifying such investments, and reasonable costs of administering the 
program of making, holding, managing, and selling the capital 
investments.

SEC. 10. TERMINATION AND CONTINUATION OF AUTHORITIES.

    (a) Termination of Investment Authority.--The authority to make 
capital investments in eligible institutions, including commitments to 
purchase preferred stock or other instruments, provided under this Act 
shall terminate 1 year after the date of enactment of this Act.
    (b) Continuation of Other Authorities.--The authorities of the 
Secretary in section 5 shall not be limited by the termination date in 
subsection (a).

SEC. 11. PRESERVATION OF AUTHORITY.

    Nothing in this Act may be construed to limit the authority of the 
Secretary under any other provision of law.

SEC. 12. ASSURANCES.

    (a) Small Business Lending Fund Separate From TARP.--The Small 
Business Lending Fund Program is established as separate and distinct 
from the Troubled Asset Relief Program established by the Emergency 
Economic Stabilization Act of 2008. An institution shall not, by virtue 
of a capital investment under the Small Business Lending Fund Program, 
be considered a recipient of the Troubled Asset Relief Program.
    (b) Change in Law.--If, after a capital investment has been made in 
an eligible institution under the Program, there is a change in law 
that modifies the terms of the investment or program in a materially 
adverse respect for the eligible institution, the eligible institution 
may, after consultation with the appropriate Federal banking agency for 
the eligible institution, repay the investment without impediment.
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