104TH CONGRESS
2D SESSION
H. R. 1720
AN ACT
To reorganize the Student Loan Marketing Association, to
privatize the College Construction Loan Insurance Asso-
ciation, to amend the Museum Services Act to include
provisions improving and consolidating Federal library
service programs, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Government-Sponsored Enterprise Privatization Act of
1996’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—REORGANIZATION AND PRIVATIZATION
Sec. 101. Reorganization of the Student Loan Marketing Association through
the formation of a holding company.
Sec. 102. Connie Lee privatization.
Sec. 103. Eligible institution.
TITLE II—MUSEUMS AND LIBRARIES
Sec. 201. Museum and library services.
Sec. 202. National Commission on Libraries and Information Science.
Sec. 203. Transfer of functions from Institute of Museum Services.
Sec. 204. Service of individuals serving on date of enactment.
Sec. 205. Consideration.
Sec. 206. Transition and transfer of funds.
TITLE III—EXTENSION OF PROGRAMS
Sec. 301. Extension of National Literacy Act of 1991.
Sec. 302. Adult Education Act Amendments.
Sec. 303. Extension of Carl D. Perkins Vocational and Applied Technology
Education Act.
TITLE IV—REPEALS AND CONFORMING AMENDMENTS
Sec. 401. Repeals.
Sec. 402. Conforming amendments.
TITLE I—REORGANIZATION AND
PRIVATIZATION
SEC. 101. REORGANIZATION OF THE STUDENT LOAN MAR-
KETING ASSOCIATION THROUGH THE FOR-
MATION OF A HOLDING COMPANY.
(a) AMENDMENT.—Part B of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1071 et seq.) is amend-
ed by inserting after section 439 (20 U.S.C. 1087–2) the
following new section:
‘‘SEC. 440. REORGANIZATION OF THE STUDENT LOAN MAR-
KETING ASSOCIATION THROUGH THE FOR-
MATION OF A HOLDING COMPANY.
‘‘(a) ACTIONS BY THE ASSOCIATION’S BOARD OF DI-
RECTORS.—The Board of Directors of the Association
shall take or cause to be taken all such action as the Board
of Directors deems necessary or appropriate to effect,
upon the shareholder approval described in subsection (b),
a restructuring of the common stock ownership of the As-
sociation, as set forth in a plan of reorganization adopted
by the Board of Directors (the terms of which shall be
consistent with this section) so that all of the outstanding
common shares of the Association shall be directly owned
by a Holding Company. Such actions may include, in the
Board of Director’s discretion, a merger of a wholly owned
subsidiary of the Holding Company with and into the As-
sociation, which would have the effect provided in the plan
of reorganization and the law of the jurisdiction in which
such subsidiary is incorporated. As part of the restructur-
ing, the Board of Directors may cause—
‘‘(1) the common shares of the Association to
be converted, on the reorganization effective date, to
common shares of the Holding Company on a one
for one basis, consistent with applicable State or
District of Columbia law; and
‘‘(2) Holding Company common shares to be
registered with the Securities and Exchange Com-
mission.
‘‘(b) SHAREHOLDER APPROVAL.—The plan of reor-
ganization adopted by the Board of Directors pursuant to
subsection (a) shall be submitted to common shareholders
of the Association for their approval. The reorganization
shall occur on the reorganization effective date, provided
that the plan of reorganization has been approved by the
affirmative votes, cast in person or by proxy, of the holders
of a majority of the issued and outstanding shares of the
Association common stock.
‘‘(c) TRANSITION.—In the event the shareholders of
the Association approve the plan of reorganization under
subsection (b), the following provisions shall apply begin-
ning on the reorganization effective date:
‘‘(1) IN GENERAL.—Except as specifically pro-
vided in this section, until the dissolution date the
Association shall continue to have all of the rights,
privileges and obligations set forth in, and shall be
subject to all of the limitations and restrictions of,
section 439, and the Association shall continue to
carry out the purposes of such section. The Holding
Company and any subsidiary of the Holding Com-
pany (other than the Association) shall not be enti-
tled to any of the rights, privileges, and obligations,
and shall not be subject to the limitations and re-
strictions, applicable to the Association under section
439, except as specifically provided in this section.
The Holding Company and any subsidiary of the
Holding Company (other than the Association or a
subsidiary of the Association) shall not purchase
loans insured under this Act until such time as the
Association ceases acquiring such loans, except that
the Holding Company may purchase such loans if
the Association is merely continuing to acquire loans
as a lender of last resort pursuant to section 439(q)
or under an agreement with the Secretary described
in paragraph (6).
‘‘(2) TRANSFER OF CERTAIN PROPERTY.—
‘‘(A) IN GENERAL.—Except as provided in
this section, on the reorganization effective date
or as soon as practicable thereafter, the Asso-
ciation shall use the Association’s best efforts to
transfer to the Holding Company or any sub-
sidiary of the Holding Company (or both), as
directed by the Holding Company, all real and
personal property of the Association (both tan-
gible and intangible) other than the remaining
property. Subject to the preceding sentence,
such transferred property shall include all right,
title, and interest in—
‘‘(i) direct or indirect subsidiaries of
the Association (excluding special purpose
funding companies in existence on the date
of enactment of this section and any inter-
est in any government-sponsored enter-
prise);
‘‘(ii) contracts, leases, and other
agreements of the Association;
‘‘(iii) licenses and other intellectual
property of the Association; and
‘‘(iv) any other property of the Asso-
ciation.
‘‘(B) CONSTRUCTION.—Nothing in this
paragraph shall be construed to prohibit the As-
sociation from transferring remaining property
from time to time to the Holding Company or
any subsidiary of the Holding Company, subject
to the provisions of paragraph (4).
‘‘(3) TRANSFER OF PERSONNEL.—On the reor-
ganization effective date, employees of the Associa-
tion shall become employees of the Holding Com-
pany (or any subsidiary of the Holding Company),
and the Holding Company (or any subsidiary of the
Holding Company) shall provide all necessary and
appropriate management and operational support
(including loan servicing) to the Association, as re-
quested by the Association. The Association, how-
ever, may obtain such management and operational
support from persons or entities not associated with
the Holding Company.
‘‘(4) DIVIDENDS.—The Association may pay
dividends in the form of cash or noncash distribu-
tions so long as at the time of the declaration of
such dividends, after giving effect to the payment of
such dividends as of the date of such declaration by
the Board of Directors of the Association, the Asso-
ciation’s capital would be in compliance with the
capital standards and requirements set forth in sec-
tion 439(r). If, at any time after the reorganization
effective date, the Association fails to comply with
such capital standards, the Holding Company shall
transfer with due diligence to the Association addi-
tional capital in such amounts as are necessary to
ensure that the Association again complies with the
capital standards.
‘‘(5) CERTIFICATION
PRIOR
TO
DIVIDEND.—
Prior to the payment of any dividend under para-
graph (4), the Association shall certify to the Sec-
retary of the Treasury that the payment of the divi-
dend will be made in compliance with paragraph (4)
and shall provide copies of all calculations needed to
make such certification.
‘‘(6) RESTRICTIONS ON NEW BUSINESS ACTIV-
ITY OR ACQUISITION OF ASSETS BY ASSOCIATION.—
‘‘(A) IN GENERAL.—After the reorganiza-
tion effective date, the Association shall not en-
gage in any new business activities or acquire
any additional program assets described in sec-
tion 439(d) other than in connection with—
‘‘(i) student loan purchases through
September 30, 2007;
‘‘(ii) contractual commitments for fu-
ture warehousing advances, or pursuant to
letters of credit or standby bond purchase
agreements, which are outstanding as of
the reorganization effective date;
‘‘(iii) the Association serving as a
lender-of-last-resort pursuant to section
439(q); and
‘‘(iv) the Association’s purchase of
loans insured under this part, if the Sec-
retary, with the approval of the Secretary
of the Treasury, enters into an agreement
with the Association for the continuation
or resumption of the Association’s second-
ary market purchase program because the
Secretary determines there is inadequate
liquidity for loans made under this part.
‘‘(B) AGREEMENT.—The Secretary is au-
thorized to enter into an agreement described in
clause (iv) of subparagraph (A) with the Asso-
ciation covering such secondary market activi-
ties. Any agreement entered into under such
clause shall cover a period of 12 months, but
may be renewed if the Secretary determines
that liquidity remains inadequate. The fee pro-
vided under section 439(h)(7) shall not apply to
loans acquired under any such agreement with
the Secretary.
‘‘(7) ISSUANCE OF DEBT OBLIGATIONS DURING
THE TRANSITION PERIOD; ATTRIBUTES OF DEBT OB-
LIGATIONS.—After the reorganization effective date,
the Association shall not issue debt obligations which
mature later than September 30, 2008, except in
connection with serving as a lender-of-last-resort
pursuant to section 439(q) or with purchasing loans
under an agreement with the Secretary as described
in paragraph (6). Nothing in this section shall mod-
ify the attributes accorded the debt obligations of
the Association by section 439, regardless of whether
such debt obligations are incurred prior to, or at any
time following, the reorganization effective date or
are transferred to a trust in accordance with sub-
section (d).
‘‘(8) MONITORING
OF
SAFETY
AND
SOUND-
NESS.—
‘‘(A) OBLIGATION TO OBTAIN, MAINTAIN,
AND REPORT INFORMATION.—The Association
shall obtain such information and make and
keep such records as the Secretary of the
Treasury may from time to time prescribe con-
cerning—
‘‘(i) the financial risk to the Associa-
tion resulting from the activities of any as-
sociated person, to the extent such activi-
ties are reasonably likely to have a mate-
rial impact on the financial condition of
the Association, including the Association’s
capital ratio, the Association’s liquidity, or
the Association’s ability to conduct and fi-
nance the Association’s operations; and
‘‘(ii) the Association’s policies, proce-
dures, and systems for monitoring and
controlling any such financial risk.
‘‘(B) SUMMARY REPORTS.—The Secretary
of the Treasury may require summary reports
of the information described in subparagraph
(A) to be filed no more frequently than quar-
terly. If, as a result of adverse market condi-
tions or based on reports provided pursuant to
this subparagraph or other available informa-
tion, the Secretary of the Treasury has con-
cerns regarding the financial or operational con-
dition of the Association, the Secretary of the
Treasury may, notwithstanding the preceding
sentence and subparagraph (A), require the As-
sociation to make reports concerning the activi-
ties of any associated person whose business ac-
tivities are reasonably likely to have a material
impact on the financial or operational condition
of the Association.
‘‘(C) SEPARATE OPERATION OF CORPORA-
TIONS.—
‘‘(i) IN GENERAL.—The funds and as-
sets of the Association shall at all times be
maintained separately from the funds and
assets of the Holding Company or any sub-
sidiary of the Holding Company and may
be used by the Association solely to carry
out the Association’s purposes and to fulfill
the Association’s obligations.
‘‘(ii) BOOKS AND RECORDS.—The As-
sociation shall maintain books and records
that clearly reflect the assets and liabilities
of the Association, separate from the as-
sets and liabilities of the Holding Company
or any subsidiary of the Holding Company.
‘‘(iii) CORPORATE OFFICE.—The As-
sociation shall maintain a corporate office
that is physically separate from any office
of the Holding Company or any subsidiary
of the Holding Company.
‘‘(iv) DIRECTOR.—No director of the
Association who is appointed by the Presi-
dent pursuant to section 439(c)(1)(A) may
serve as a director of the Holding Com-
pany.
‘‘(v) ONE OFFICER REQUIREMENT.—
At least one officer of the Association shall
be an officer solely of the Association.
‘‘(vi) 
TRANSACTIONS.—Transactions
between the Association and the Holding
Company or any subsidiary of the Holding
Company, including any loan servicing ar-
rangements, shall be on terms no less fa-
vorable to the Association than the Asso-
ciation could obtain from an unrelated
third party offering comparable services.
‘‘(vii) 
CREDIT
PROHIBITION.—The
Association shall not extend credit to the
Holding Company or any subsidiary of the
Holding Company nor guarantee or pro-
vide any credit enhancement to any debt
obligations of the Holding Company or any
subsidiary of the Holding Company.
‘‘(viii) AMOUNTS
COLLECTED.—Any
amounts collected on behalf of the Associa-
tion by the Holding Company or any sub-
sidiary of the Holding Company with re-
spect to the assets of the Association, pur-
suant to a servicing contract or other ar-
rangement between the Association and the
Holding Company or any subsidiary of the
Holding Company, shall be collected solely
for the benefit of the Association and shall
be immediately deposited by the Holding
Company or such subsidiary to an account
under the sole control of the Association.
‘‘(D) ENCUMBRANCE
OF
ASSETS.—Not-
withstanding any Federal or State law, rule, or
regulation, or legal or equitable principle, doc-
trine, or theory to the contrary, under no cir-
cumstances shall the assets of the Association
be available or used to pay claims or debts of
or incurred by the Holding Company. Nothing
in this subparagraph shall be construed to limit
the right of the Association to pay dividends
not otherwise prohibited under this subpara-
graph or to limit any liability of the Holding
Company explicitly provided for in this section.
‘‘(E) HOLDING
COMPANY
ACTIVITIES.—
After the reorganization effective date and prior
to the dissolution date, all business activities of
the Holding Company shall be conducted
through subsidiaries of the Holding Company.
‘‘(F) CONFIDENTIALITY.—Any information
provided by the Association pursuant to this
section shall be subject to the same confiden-
tiality 
obligations 
contained 
in 
section
439(r)(12).
‘‘(G) DEFINITION.—For purposes of this
paragraph, the term ‘associated person’ means
any person, other than a natural person, who is
directly or indirectly controlling, controlled by,
or under common control with, the Association.
‘‘(9) ISSUANCE OF STOCK WARRANTS.—On the
reorganization effective date, the Holding Company
shall issue to the Secretary of the Treasury a num-
ber of stock warrants that is equal to one percent
of the outstanding shares of the Association, deter-
mined as of the last day of the fiscal quarter preced-
ing the date of enactment of this section, with each
stock warrant entitling the holder of the stock war-
rant to purchase from the Holding Company one
share of the registered common stock of the Holding
Company or the Holding Company’s successors or
assigns, at any time on or before September 30,
2008. The exercise price for such warrants shall be
an amount equal to the average closing price of the
common stock of the Association for the 20 business
days prior to the date of enactment of this section
on the exchange or market which is then the pri-
mary exchange or market for the common stock of
the Association. The number of shares of Holding
Company common stock subject to each warrant and
the exercise price of each warrant shall be adjusted
as necessary to reflect—
‘‘(A) the conversion of Association common
stock into Holding Company common stock as
part of the plan of reorganization approved by
the Association’s shareholders; and
‘‘(B) any issuance or sale of stock (includ-
ing issuance or sale of treasury stock), stock
split, recapitalization, reorganization, or other
corporate event, if agreed to by the Secretary of
the Treasury and the Association.
‘‘(10) RESTRICTIONS ON TRANSFER OF ASSO-
CIATION
SHARES
AND
BANKRUPTCY
OF
ASSOCIA-
TION.—After the reorganization effective date, the
Holding Company shall not sell, pledge, or otherwise
transfer the outstanding shares of the Association,
or agree to or cause the liquidation of the Associa-
tion or cause the Association to file a petition for
bankruptcy under title 11, United States Code, with-
out prior approval of the Secretary of the Treasury
and the Secretary of Education.
‘‘(d) TERMINATION OF THE ASSOCIATION.—In the
event the shareholders of the Association approve a plan
of reorganization under subsection (b), the Association
shall dissolve, and the Association’s separate existence
shall terminate on September 30, 2008, after discharge
of all outstanding debt obligations and liquidation pursu-
ant to this subsection. The Association may dissolve pur-
suant to this subsection prior to such date by notifying
the Secretary of Education and the Secretary of the
Treasury of the Association’s intention to dissolve, unless
within 60 days after receipt of such notice the Secretary
of Education notifies the Association that the Association
continues to be needed to serve as a lender of last resort
pursuant to section 439(q) or continues to be needed to
purchase loans under an agreement with the Secretary de-
scribed in paragraph (6). On the dissolution date, the As-
sociation shall take the following actions:
‘‘(1) ESTABLISHMENT OF A TRUST.—The Asso-
ciation shall, under the terms of an irrevocable trust
agreement that is in form and substance satisfactory
to the Secretary of the Treasury, the Association
and the appointed trustee, irrevocably transfer all
remaining obligations of the Association to the trust
and irrevocably deposit or cause to be deposited into
such trust, to be held as trust funds solely for the
benefit of holders of the remaining obligations,
money or direct noncallable obligations of the United
States or any agency thereof for which payment the
full faith and credit of the United States is pledged,
maturing as to principal and interest in such
amounts and at such times as are determined by the
Secretary of the Treasury to be sufficient, without
consideration of any significant reinvestment of such
interest, to pay the principal of, and interest on, the
remaining obligations in accordance with their
terms. To the extent the Association cannot provide
money or qualifying obligations in the amount re-
quired, the Holding Company shall be required to
transfer money or qualifying obligations to the trust
in the amount necessary to prevent any deficiency.
‘‘(2) USE OF TRUST ASSETS.—All money, obli-
gations, or financial assets deposited into the trust
pursuant to this subsection shall be applied by the
trustee to the payment of the remaining obligations
assumed by the trust.
‘‘(3) OBLIGATIONS NOT TRANSFERRED TO THE
TRUST.—The Association shall make proper provi-
sion for all other obligations of the Association not
transferred to the trust, including the repurchase or
redemption, or the making of proper provision for
the repurchase or redemption, of any preferred stock
of the Association outstanding. Any obligations of
the Association which cannot be fully satisfied shall
become liabilities of the Holding Company as of the
date of dissolution.
‘‘(4) TRANSFER OF REMAINING ASSETS.—After
compliance with paragraphs (1) and (3), any re-
maining assets of the trust shall be transferred to
the Holding Company or any subsidiary of the Hold-
ing Company, as directed by the Holding Company.
‘‘(e) OPERATION OF THE HOLDING COMPANY.—In
the event the shareholders of the Association approve the
plan of reorganization under subsection (b), the following
provisions shall apply beginning on the reorganization ef-
fective date:
‘‘(1) HOLDING
COMPANY
BOARD
OF
DIREC-
TORS.—The number of members and composition of
the Board of Directors of the Holding Company
shall be determined as set forth in the Holding Com-
pany’s charter or like instrument (as amended from
time to time) or bylaws (as amended from time to
time) and as permitted under the laws of the juris-
diction of the Holding Company’s incorporation.
the Association’s ability to conduct and fi-
nance the Association’s operations; and
‘‘(II) the Association’s policies, proce-
dures, and systems for monitoring and
controlling any such financial risk.
‘‘(ii) SUMMARY REPORTS.—The Secretary
of the Treasury may require summary reports
of such information to be filed no more fre-
quently than quarterly. If, as a result of ad-
verse market conditions or based on reports
provided pursuant to this subparagraph or
other available information, the Secretary of the
Treasury has concerns regarding the financial
or operational condition of the Association, the
Secretary of the Treasury may, notwithstanding
the preceding sentence and clause (i), require
the Association to make reports concerning the
activities of any associated person, whose busi-
ness activities are reasonably likely to have a
material impact on the financial or operational
condition of the Association.
‘‘(iii) DEFINITION.—For purposes of this
subparagraph, the term ‘associated person’
means any person, other than a natural person,
directly or indirectly controlling, controlled by,