I

105TH CONGRESS

2D SESSION H. R. 4808

To amend the Federal Deposit Insurance Act to permit an affiliation between

a depository institution and the holding company successor to the Student Loan Marketing Association under certain circumstances and subject to certain conditions.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 12, 1998

Mr. SNOWBARGER (for himself, Mr. KANJORSKI, and Mr. DAVIS of Virginia)

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

Banking and Financial Services

A BILL

To amend the Federal Deposit Insurance Act to permit an

affiliation between a depository institution and the holding company successor to the Student Loan Marketing

Association under certain circumstances and subject to

certain conditions.

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 ‘‘Depository Institution5 GSE Affiliation Act of 1998’’.
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1 SEC. 2. CERTAIN AFFILIATION PERMITTED.

2 Section 18(s) of the Federal Deposit Insurance Act

3 (12 U.S.C. 1828(s)) is amended—

4 (1) by redesignating paragraph (4) as para5 graph (5); and

6 (2) by inserting after paragraph (3) the follow7 ing new paragraph:

8 ‘‘(4) STUDENT LOANS.—

9 ‘‘(A) IN GENERAL.—This subsection shall

10 not apply to any arrangement between the

11 Holding Company (or any subsidiary of the

12 Holding Company other than the Student Loan

13 Marketing Association) and a depository insti14 tution, if the Secretary approves the affiliation

15 and determines that—

16 ‘‘(i) the reorganization of such Asso17 ciation in accordance with section 440 of

18 the Higher Education Act of 1965, as

19 amended, will not be adversely affected by

20 the arrangement;

21 ‘‘(ii) the dissolution of the Association

22 pursuant to such reorganization will occur

23 before the end of the 2-year period begin24 ning on the date on which such arrange25 ment is consummated or on such earlier

26 date as the Secretary deems appropriate:
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1 Provided, That the Secretary may extend

2 this period for not more than 1 year at a

3 time if the Secretary determines that such

4 extension is in the public interest and is

5 appropriate to achieve an orderly reorga6 nization of the Association or to prevent

7 market disruptions in connection with such

8 reorganization, but no such extensions

9 shall in the aggregate exceed 2 years;

10 ‘‘(iii) the Association will not purchase

11 or extend credit to, or guarantee or provide

12 credit enhancement to, any obligation of

13 the depository institution;

14 ‘‘(iv) the operations of the Association

15 will be separate from the operations of the

16 depository institution; and

17 ‘‘(v) until the ‘dissolution date’ (as

18 that term is defined in section 440 of the

19 Higher Education Act of 1965, as amend20 ed) has occurred, such depository institu21 tion will not use the trade name or service

22 mark ‘Sallie Mae’ in connection with any

23 product or service it offers if the appro24 priate Federal banking agency for such de25 pository institution determines that—
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1 ‘‘(I) the depository institution is

2 the only institution offering such

3 product or service using the ‘Sallie

4 Mae’ name; and

5 ‘‘(II) such use would result in the

6 depository institution having an unfair

7 competitive advantage over other de8 pository institutions.

9 ‘‘(B) TERMS AND CONDITIONS.—In ap10 proving any arrangement referred to in sub11 paragraph (A) the Secretary may impose any

12 terms and conditions on such an arrangement

13 that the Secretary considers appropriate, in14 cluding—

15 ‘‘(i) imposing additional restrictions

16 on the issuance of debt obligations by the

17 Association; or

18 ‘‘(ii) restricting the use of proceeds

19 from the issuance of such debt.

20 ‘‘(C) ADDITIONAL LIMITATIONS.—In the

21 event that the Holding Company (or any sub22 sidiary of the Holding Company) enters into

23 such an arrangement, the value of the Associa24 tion’s ‘investment portfolio’ shall not at any

25 time exceed the lesser of—
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1 ‘‘(i) the value of such portfolio on the

2 date of the enactment of this subsection; or

3 ‘‘(ii) the value of such portfolio on the

4 date such an arrangement is con5 summated. The term ‘investment portfolio’

6 shall mean all investments shown on the

7 consolidated balance sheet of the Associa8 tion other than—

9 ‘‘(I) any instrument or assets de10 scribed in section 439(d) of the High11 er Education Act of 1965, as amend12 ed;

13 ‘‘(II) any direct noncallable obli14 gations of the United States or any

15 agency thereof for which the full faith

16 and credit of the United States is

17 pledged; or

18 ‘‘(III) cash or cash equivalents.

19 ‘‘(D) ENFORCEMENT.—The terms and

20 conditions imposed under subparagraph (B)

21 may be enforced by the Secretary in accordance

22 with section 440 of the Higher Education Act

23 of 1965.
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1 ‘‘(E) DEFINITIONS.—For purposes of this

2 paragraph, the following definition shall

3 apply—

4 ‘‘(i) ASSOCIATION; HOLDING COM5 PANY.—Notwithstanding any provision in

6 section 3, the terms ‘Association’ and

7 ‘Holding Company’ have the same mean8 ings as in section 440(i) of the Higher

9 Education Act of 1965.

10 ‘‘(ii) SECRETARY.—The term ‘Sec11 retary’ means the Secretary of the Treas12 ury.’’.

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