II 

108TH CONGRESS 

1ST SESSION S. 1713

To amend title IV of the Small Business Investment Act of 1958, relating 

to a pilot program for credit enhancement guarantees on pools of nonSBA loans. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 3, 2003

Ms. SNOWE (for herself, Mr. PRYOR, and Mr. BOND) introduced the following 

bill; which was read twice and referred to the Committee on Small Business and Entrepreneurship 

A BILL

To amend title IV of the Small Business Investment Act 

of 1958, relating to a pilot program for credit enhancement guarantees on pools of non-SBA loans.

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 ‘‘Small Business Credit 

5 Liquidity Act of 2003’’. 
2

•S 1713 IS 

1 SEC. 2. PILOT PROGRAM FOR GUARANTEES ON POOLS OF 

2 NON-SBA LOANS. 

3 Title IV of the Small Business Investment Act of 

4 1958 (15 U.S.C. 692 et seq.) is amended by adding at 

5 the end the following: 

6 ‘‘PART C—CREDIT ENHANCEMENT GUARANTEES

7 ‘‘SEC. 420. (a)(1) The Administration is authorized, 

8 upon such terms and conditions as it may prescribe, in 

9 order to encourage lenders to increase the availability of 

10 small business financing by improving such lenders’ access 

11 to reasonable sources of funding, to provide a credit en12 hancement guarantee, or commitment to guarantee, of the 

13 timely payment of a portion of the principal and interest 

14 on securities issued and managed by not less than 2 quali15 fied entities authorized and approved by the Administra16 tion. 

17 ‘‘(2) The entities authorized under this subsection to 

18 act as issuers and managers of pools or trusts of loans 

19 shall be well-capitalized, as defined by the Administration, 

20 and shall maintain sufficient reserves to allow securities 

21 to be issued representing interests in each pool or trust 

22 that are rated as investment grade by a nationally-recog23 nized rating agency. 

24 ‘‘(3) The authority of the entities authorized under 

25 this subsection shall be reviewed annually by the Adminis-
3

•S 1713 IS 

1 tration and may be renewed upon the satisfactory comple2 tion of such review. 

3 ‘‘(4) The Administration shall set and maintain 

4 standards for entities authorized under this subsection, in5 cluding standards relating to delinquency, default, liquida6 tion, and loss rates. 

7 ‘‘(5) If an entity authorized under this subsection 

8 fails to meet the standards set pursuant to paragraph (4), 

9 the Administration may terminate the entity’s participa10 tion in the pilot program under this subsection. 

11 ‘‘(b)(1)(A) The Administration may provide its credit 

12 enhancement guarantees in respect of securities that rep13 resent interests in, or other obligations issued by, a trust, 

14 pool, or other entity whose assets (other than the Adminis15 tration’s credit enhancement guarantee and credit en16 hancements provided by other parties) consist of loans 

17 made to small business concerns. 

18 ‘‘(B) As used in this paragraph, the term ‘small busi19 ness concern’ has the meaning given that term in either 

20 the Small Business Act (15 U.S.C. 631 et seq.) or this 

21 Act (15 U.S.C. 661 et seq.). 

22 ‘‘(2) The credit enhancement guarantees provided by 

23 the Administration under paragraph (1) shall be second24 loss guarantees that are only available after the full pay25 ment of credit enhancement guarantees offered by the en-
4

•S 1713 IS 

1 tities authorized to act as issuers and managers of pools 

2 or trusts of loans under this section. 

3 ‘‘(3) A pool or trust of loans shall not be eligible for 

4 guarantees under this section—

5 ‘‘(A) if the value of such loans exceeds 

6 $350,000,000 in fiscal year 2004; 

7 ‘‘(B) if the value of such loans exceeds 

8 $400,000,000 in fiscal year 2005; or 

9 ‘‘(C) if the value of such loans exceeds 

10 $450,000,000 in fiscal year 2006. 

11 ‘‘(4) All loans under paragraph (1) shall be origi12 nated, purchased, or assembled and managed consistent 

13 with requirements prescribed by the Administration in 

14 connection with this credit enhancement guarantee pro15 gram. 

16 ‘‘(5) The Administration shall prescribe requirements 

17 to be observed by the issuers and managers of the securi18 ties covered by credit enhancement guarantees to ensure 

19 the safety and soundness of the credit enhancement guar20 antee program. 

21 ‘‘(c) The full faith and credit of the United States 

22 is pledged to the payment of all amounts the Administra23 tion may be required to pay as a result of credit enhance24 ment guarantees under this section. 
5

•S 1713 IS 

1 ‘‘(d)(1) The Administration may issue credit en2 hancement guarantees in an amount—

3 ‘‘(A) not to exceed $2,100,000,000 in fiscal 

4 year 2004; 

5 ‘‘(B) not to exceed $3,250,000,000 in fiscal 

6 year 2005; and 

7 ‘‘(C) not to exceed $4,500,000,000 in fiscal 

8 year 2006. 

9 ‘‘(2) The Administration shall set the percentage and 

10 priority of each credit enhancement guarantee on issued 

11 securities at a level not to exceed 25 percent of the value 

12 of the securities so that the amount of the Administra13 tion’s anticipated net loss (if any) as a result of such guar14 antee is fully reserved in a credit subsidy account funded 

15 wholly by fees collected by the Administration from the 

16 issuers or managers of the pool or trust. 

17 ‘‘(3) The Administration shall charge and collect a 

18 fee from the issuer based on the Administration’s guaran19 teed amount of issued securities, and the amount of such 

20 fee shall equal the estimated credit subsidy cost of the Ad21 ministration’s credit enhancement guarantee. 

22 ‘‘(4) The fees provided for under this subsection shall 

23 be adjusted annually, as necessary, by the Administration. 
6

•S 1713 IS 

1 ‘‘(5) The Federal government shall not appropriate 

2 any funds to finance credit enhancement guarantees under 

3 this section. 

4 ‘‘(e) REPORT AND ANALYSIS.—

5 ‘‘(1) REPORT.—

6 ‘‘(A) IN GENERAL.—During the develop7 ment and implementation of the pilot program, 

8 the Administrator shall submit a report on the 

9 status of the pilot program under this section 

10 to Congress in each annual budget request and 

11 performance plan. 

12 ‘‘(B) CONTENTS.—The report submitted 

13 under subparagraph (A) shall include, among 

14 other items, information about the loans in the 

15 pools or trusts, including delinquency, default, 

16 loss, and recovery rates. 

17 ‘‘(2) ANALYSIS AND REPORT.—Not later than 

18 December 30, 2005, the Comptroller General shall—

19 ‘‘(A) conduct an analysis of the pilot pro20 gram under this section; and 

21 ‘‘(B) submit a report to Congress that con22 tains a summary of the analysis conducted 

23 under subparagraph (A) and a description of 

24 any effects, not attributable to other causes, of 

25 the pilot program on the lending programs 
7

•S 1713 IS 

1 under section 7(a) of the Small Business Act 

2 (15 U.S.C. 636(a)) and title V of this Act. 

3 ‘‘(3) IMPLEMENTATION.—

4 ‘‘(A) REPORT.—After completing oper5 ational guidelines to carry out the pilot pro6 gram under this section, the Administration 

7 shall submit a report, which describes the meth8 od in which the pilot program will be imple9 mented, to—

10 ‘‘(i) the Committee on Small Business 

11 and Entrepreneurship of the Senate; and 

12 ‘‘(ii) the Committee on Small Busi13 ness of the House of Representatives. 

14 ‘‘(B) TIMING.—The Administration shall 

15 not implement the pilot program under this sec16 tion until the date that is 50 days after the re17 port has been submitted under subparagraph 

18 (A). 

19 ‘‘(f) SUNSET PROVISION.—This section shall remain 

20 in effect until September 30, 2006.’’.

Æ