H.R. 5297 (111th): Small Business Jobs Act of 2010

The text of the bill below is as of May 27, 2010 (Reported by House Committee).

Source: GPO

IB

Union Calendar No. 283

111th CONGRESS

2d Session

H. R. 5297

[Report No. 111–499]

IN THE HOUSE OF REPRESENTATIVES

May 13, 2010

(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

May 27, 2010

Additional sponsors: Ms. Norton and Ms. Clarke

May 27, 2010

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Strike out all after the enacting clause and insert the part printed in italic

For text of introduced bill, see copy of bill as introduced on May 13, 2010


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.


I

Small Business Lending Fund

1.

Short title

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

2.

Purpose

The purpose of this title 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.

3.

Definitions

For purposes of this title:

(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 Initiative 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 consolidated assets of more than $10,000,000,000, as so reported;

(B)

any bank holding company which has total assets of equal to or less than $10,000,000,000; and

(C)

any savings and loan holding company which has total assets of equal to or less than $10,000,000,000.

(10)

Fund

The term Fund means the Small Business Lending Fund established by section 4(a)(1) of this title.

(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 title.

(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

(A)

In general

The term small business lending means small business lending, as defined by and reported in an eligible institution’s quarterly call report, of the following types:

(i)

Commercial and industrial loans plus.

(ii)

Owner-occupied nonfarm, nonresidential real estate loans.

(iii)

Loans to finance agricultural production and other loans to farmers.

(iv)

Loans secured by farmland.

(B)

Treatment of holding companies

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.

(16)

Minority-owned and women-owned business

The terms minority-owned business and women-owned business shall have the meaning given the terms minority-owned business and women’s business, respectively, under section 21A(r)(4) of the Federal Home Loan Bank Act (12 U.S.C. 1441A(r)(4)).

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 title.

(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 title.

(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.

(3)

Proceeds used to pay down public debt

All funds received by the Secretary in connection with purchases made pursuant to paragraph (1), including interest payments, dividend payments, and proceeds from the sale of any financial instrument, shall be paid into the general fund of the Treasury for reduction of the public debt.

(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)

Institutions with assets of $1,000,000,000 or less

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)

Institutions with assets of more than $1,000,000,000 and less than $10,000,000,000

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)

Treatment of holding companies

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)

Treatment of applicants that are institutions controlled by holding companies

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 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)

Requirement to provide a small business lending plan

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)

Ineligibility of institutions on FDIC problem bank list

(A)

In general

An eligible institution may not receive any capital investment under the Program if—

(i)

such institution is on the FDIC problem bank list; or

(ii)

such institution has been removed from the FDIC problem bank list for less than 90 days.

(B)

FDIC problem bank list defined

For purposes of this subparagraph, the term FDIC problem bank list means the list of institutions with a current rating of 4 or 5 under the Uniform Financial Institutions Rating System, or such other list designated by the Federal Deposit Insurance Corporation.

(4)

Incentives to lend

(A)

Requirements on preferred stock and other financial instruments

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 the amount of 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 the amount of small business lending relative to the baseline—

(I)

if the amount of small business lending has increased by less than 2.5 percent, the dividend or interest rate shall be 5 percent;

(II)

if the amount of 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 the amount of 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 the amount of 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 the amount of small business lending has increased by 10 percent or greater, the dividend or interest rate shall be 1 percent.

(B)

Basis of initial rate

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)

Timing of rate adjustments

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)

Rate following initial 2-year period

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 4½-year period that begins on the date of the investment. In the case where the amount of small business 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 4½-year period that begins on the date of the investment.

(E)

Rate following initial 4½-year period

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 4½-year period that begins on the date of the capital investment under the Program.

(F)

Limitation on rate reductions with respect to certain amount

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 a dollar amount of the investment made by Treasury that is greater than the dollar amount increase in the amount of small business 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)

Rate adjustments for S corporation

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.

(H)

Repayment deadline

The capital investment received by an eligible institution under the Program shall be repaid by the end of the 10-year period that begins on the date of the capital investment under the Program.

(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 title.

(6)

Capital purchase program refinance

(A)

In general

The Secretary shall, in a manner that the Secretary determines to be consistent with the purposes of this title, 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.

(B)

Prohibition on participation by non-paying CPP participants

Subparagraph (A) shall not apply to any eligible institution that has ever missed a dividend payment due under the CPP.

(7)

Minority outreach

The Secretary shall require eligible institutions receiving capital investments under the Program to provide outreach and advertising in the appropriate language of the applicant pool describing the availability and application process of receiving loans from the eligible institution that are made possible by the Program through the use of print, radio, television or electronic media outlets which target organizations, trade associations, and individuals that represent or work within or are members of minority communities.

(8)

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 Fund in a manner consistent with the purposes of this title.

(9)

Minimum underwriting standards

The appropriate Federal banking agency for an eligible institution that receives funds under the Program shall within 60 days issue regulations defining minimum underwriting standards that must be used for loans made by the eligible institution using such funds.

5.

Additional authorities of the Secretary

The Secretary may take such actions as the Secretary deems necessary to carry out the authorities in this title, 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, security broker or dealer, asset manager, or investment adviser as a financial agent of the Federal Government and such institution shall perform all such reasonable duties related to this title 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 title, to perform reasonable duties related to this title.

(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 title.

(5)

Subject to section 4(b)(3), the Secretary may manage any assets purchased under this title, 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 title, 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 title.

(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 title.

6.

Considerations

In exercising the authorities granted in this title, 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 that are minority- and women-owned and that also serve low- and moderate-income, minority, and other underserved or rural communities;

(3)

protecting and increasing American jobs;

(4)

ensuring that all eligible institutions may apply to participate in the program established under this title, without discrimination based on geography;

(5)

providing transparency with respect to use of funds provided under this title;

(6)

minimizing the cost to taxpayers of exercising the authorities; and

(7)

promoting and engaging in financial education to would-be borrowers.

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 title;

(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, which shall include participating institutions and amounts each institution has received under the Program; and

(3)

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 detailing how eligible institutions participating in the Program have used the funds such institutions received under the Program.

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.

9.

Credit reform; Funding

(a)

Credit reform

The cost of purchases of preferred stock and other financial instruments made as capital investments under this title 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.

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 title shall terminate 1 year after the date of enactment of this title.

(b)

Continuation of other authorities

The authorities of the Secretary in section 5 shall not be limited by the termination date in subsection (a).

11.

Preservation of authority

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

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.

13.

Study and report with respect to women-owned and minority-owned businesses

(a)

Study

The Secretary shall conduct a study to determine the number of women-owned businesses and minority-owned businesses that receive assistance as a result of the Program, including—

(1)

efforts, including technical assistance and outreach that institutions have employed under the Program to provide loans to minority- and women-owned small businesses;

(2)

loan applications received;

(3)

loan applications approved; and

(4)

and any other relevant data related to such transactions to promote the purposes of the Program as the Secretary may require.

(b)

Report

Not later than one year after the date of enactment of this Act, the Secretary shall submit to Congress a report on the results of the study conducted pursuant to subsection (a).

(c)

Information provided to the Secretary

Eligible institutions that participate in the Program shall provide the Secretary with such information as the Secretary may require to carry out the study required by this section.

II

State Small Business Credit Initiative

201.

Short title

This title may be cited as the State Small Business Credit Initiative Act of 2010.

202.

Definitions

For purposes of this title, the following definitions shall apply:

(1)

Appropriate Federal banking agency

The term appropriate Federal banking agency

(A)

has the same meaning as in section 3 of the Federal Deposit Insurance Act; and

(B)

includes the National Credit Union Administration Board in the case of any credit union the deposits of which are insured in accordance with the Federal Credit Union Act.

(2)

Enrolled loan

The term enrolled loan means a loan made by a financial institution lender that is enrolled by a participating State in an approved State capital access program in accordance with this title.

(3)

Federal contribution

The term Federal contribution means the portion of the contribution made by a participating State to, or for the account of, an approved State program that is made with Federal funds allocated to the State by the Secretary under section 203.

(4)

Financial institution

The term financial institution means any insured depository institution, insured credit union, or community development financial institution, as those terms are each defined in section 103 of the Riegle Community Development and Regulatory Improvement Act of 1994.

(5)

Participating state

The term participating State means any State that has been approved for participation in the Program under section 204.

(6)

Program

The term Program means the State Small Business Credit Initiative established under this title.

(7)

Qualifying loan or swap funding facility

The term qualifying loan or swap funding facility means a contractual arrangement between a participating State and a private financial entity under which—

(A)

the participating State delivers funds to the entity as collateral;

(B)

the entity provides funding from the arrangement back to the participating State; and

(C)

the full amount of resulting funding from the arrangement, less any fees and other costs of the arrangement, is contributed to, or for the account of, an approved State program.

(8)

Reserve fund

The term reserve fund means a fund, established by a participating State, dedicated to a particular financial institution lender, for the purposes of—

(A)

depositing all required premium charges paid by the financial institution lender and by each borrower receiving a loan under an approved State program from that financial institution lender;

(B)

depositing contributions made by the participating State, including State contributions made with Federal contributions; and

(C)

covering losses on enrolled loans by disbursing accumulated funds.

(9)

State

The term State means—

(A)

a State of the United States;

(B)

the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands;

(C)

when designated by a State of the United States, a political subdivision of that State that the Secretary determines has the capacity to participate in the Program; and

(D)

under the circumstances described in section 204(d), a municipality of a State of the United States to which the Secretary has given a special permission under section 204(d).

(10)

State capital access program

The term State capital access program means a program of a State that—

(A)

uses public resources to promote private access to credit; and

(B)

meets the eligibility criteria in section 205(c).

(11)

State other credit support program

The term State other credit support program

(A)

means a program of a State that—

(i)

uses public resources to promote private access to credit;

(ii)

is not a State capital access program; and

(iii)

meets the eligibility criteria in section 206(c); and

(B)

includes, collateral support programs, loan participation programs, and credit guarantee programs.

(12)

State program

The term State program means a State capital access program or a State other credit support program.

(13)

Secretary

The term Secretary means the Secretary of the Treasury.

203.

Federal funds allocated to States

(a)

Program established; Purpose

There is established the State Small Business Credit Initiative (hereinafter in this title referred to as the Program), to be administered by the Secretary. Under the Program, the Secretary shall allocate Federal funds to participating States and make the allocated funds available to the participating States as provided in this section for the uses described in this section.

(b)

Allocation formula

(1)

In general

Not later than 30 days after the date of enactment of this title, the Secretary shall allocate Federal funds to participating States so that each State is eligible to receive an amount equal to the average of the respective amounts that the State—

(A)

would receive under the 2009 allocation, as determined under paragraph (2); and

(B)

would receive under the 2010 allocation, as determined under paragraph (3).

(2)

2009 allocation formula

(A)

In general

The Secretary shall determine the 2009 allocation by allocating Federal funds among the States in the proportion that each such State’s 2008 State employment decline bears to the aggregate of the 2008 State employment declines for all States.

(B)

Minimum allocation

The Secretary shall adjust the allocations under subparagraph (A) for each State to the extent necessary to ensure that no State receives less than 0.9 percent of the Federal funds.

(C)

2008 State employment decline defined

For purposes of this paragraph and with respect to a State, the term 2008 State employment decline means the excess (if any) of—

(i)

the number of individuals employed in such State determined for December 2007; over

(ii)

the number of individuals employed in such State determined for December 2008.

(3)

2010 allocation formula

(A)

In general

The Secretary shall determine the 2010 allocation by allocating Federal funds among the States in the proportion that each such State’s 2009 unemployment number bears to the aggregate of the 2009 unemployment numbers for all of the States.

(B)

Minimum allocation

The Secretary shall adjust the allocations under subparagraph (A) for each State to the extent necessary to ensure that no State receives less than 0.9 percent of the Federal funds.

(C)

2009 unemployment number defined

For purposes of this paragraph and with respect to a State, the term 2009 unemployment number means the number of individuals within such State who were determined to be unemployed by the Bureau of Labor Statistics for December 2009.

(c)

Availability of allocated amount

The amount allocated by the Secretary to each participating State under subsection (b) shall be made available to the State as follows:

(1)

Allocated amount generally to be available to State in one-thirds

(A)

In general

The Secretary shall—

(i)

apportion the participating State’s allocated amount into one-thirds;

(ii)

transfer to the participating State the first one-third when the Secretary approves the State for participation under section 204; and

(iii)

transfer to the participating State each successive one-third when the State has certified to the Secretary that it has expended, transferred, or obligated 80 percent of the last transferred one-third for Federal contributions to, or for the account of, State programs.

(B)

Authority to withhold pending audit

The Secretary may withhold the transfer of any successive one-third pending results of a financial audit.

(C)

Transfers contingent on Inspector General audits

(i)

In general

Before a transfer to a participating State of the second one-third or the last one-third, the Inspector General of the Department of the Treasury shall carry out an audit of the participating State’s use of amounts already received.

(ii)

Penalty for misstatement

Any participating State that is found to have intentionally misstated any report issued to the Secretary under the Program shall be ineligible to receive any additional funds under the Program. Funds that had been allocated or that would otherwise have been allocated to such participating State shall be paid into the general fund of the Treasury for reduction of the public debt.

(iii)

Municipalities

For purposes of this subparagraph, the term participating State shall include a municipality given special permission to participate in the Program, pursuant to section 204(d).

(2)

Transferred amounts

Each amount transferred to a participating State under this section shall remain available to the State until used by the State as permitted under paragraph (3).

(3)

Use of transferred funds

Each participating State may use funds transferred to it under this section only—

(A)

for making Federal contributions to, or for the account of, an approved State program;

(B)

as collateral for a qualifying loan or swap funding facility;

(C)

in the case of the first one-third transferred, for paying administrative costs incurred by the State in implementing an approved State program in an amount not to exceed 5 percent of that first one-third; or

(D)

in the case of each successive one-third transferred, for paying administrative costs incurred by the State in implementing an approved State program in an amount not to exceed 3 percent of that successive one-third.

(4)

Termination of availability of amounts not transferred within 2 years of participation

Any portion of a participating State’s allocated amount that has not been transferred to the State under this section by the end of the 2-year period beginning on the date that the Secretary approves the State for participation may be deemed by the Secretary to be no longer allocated to the State and no longer available to the State and shall be returned to the General Fund of the Treasury.

(5)

Definitions

For purposes of this section—

(A)

the term allocated amount means the total amount of Federal funds allocated by the Secretary under subsection (b) to the participating State; and

(B)

the term one-third means—

(i)

in the case of the first and second one-thirds, an amount equal to 33 percent of a participating State’s allocated amount; and

(ii)

in the case of the last one-third, an amount equal to 34 percent of a participating State’s allocated amount.

204.

Approving States for participation

(a)

Application

Any State may apply to the Secretary for approval to be a participating State under the Program and to be eligible for an allocation of Federal funds under the Program.

(b)

General approval criteria

The Secretary shall approve a State to be a participating State, if—

(1)

a specific department, agency, or political subdivision of the State has been designated to implement a State program and participate in the Program;

(2)

all legal actions necessary to enable such designated department, agency, or political subdivision to implement a State program and participate in the Program have been accomplished;

(3)

the State has filed an application with the Secretary for approval of a State capital access program under section 205 or approval as a State other credit support program under section 206, in each case within the time period provided in the respective section; and

(4)

the State and the Secretary have executed an allocation agreement that—

(A)

conforms to the requirements of this title;

(B)

ensures that the State program complies with such national standards as are established by the Secretary under section 209(a)(2);

(C)

sets forth internal control, compliance, and reporting requirements as established by the Secretary, and such other terms and conditions necessary to carry out the purposes of this title, including an agreement by the State to allow the Secretary to audit State programs;

(D)

requires that the State program be fully positioned, within 90 days of the State’s execution of the allocation agreement with the Secretary, to act on providing the kind of credit support that the State program was established to provide; and

(E)

includes an agreement by the State to deliver to the Secretary, and update annually, a schedule describing how the State intends to apportion among its State programs the Federal funds allocated to the State.

(c)

Contractual arrangements for implementation of State programs

A State may be approved to be a participating State, and be eligible for an allocation of Federal funds under the Program, if the State has contractual arrangements for the implementation and administration of its State program with—

(1)

an existing, approved State program administered by another State; or

(2)

an authorized agent of, or entity supervised by, the State, including for-profit and not-for-profit entities.

(d)

Special permission

(1)

Circumstances when a municipality may apply directly

If a State does not, within 60 days after the date of enactment of this title, file with the Secretary a notice of its intent to apply for approval by the Secretary of a State program or within 9 months after the date of enactment of this title, file with the Secretary a complete application for approval of a State program, the Secretary may grant to municipalities of that State a special permission that will allow them to apply directly to the Secretary without the State for approval to be participating municipalities.

(2)

Timing requirements applicable to municipalities applying directly

To qualify for the special permission, a municipality of a State must, within 12 months after the date of enactment of this title, file with the Secretary a complete application for approval by the Secretary of a State program.

(3)

Notices of intent and applications from more than 1 municipality

A municipality of a State may combine with 1 or more other municipalities of that State to file a joint notice of intent to file and a joint application.

(4)

Approval criteria

The general approval criteria in paragraphs (2) and (4) shall apply.

(5)

Allocation to municipalities

(A)

If more than 3

If more than 3 municipalities, or combination of municipalities as provided in paragraph (3), of a State apply for approval by the Secretary to be participating municipalities under this subsection, and the applications meet the approval criteria in paragraph (4), the Secretary shall allocate Federal funds to the 3 municipalities with the largest populations.

(B)

If 3 or fewer

If 3 or fewer municipalities, or combination of municipalities as provided in paragraph (3), of a State apply for approval by the Secretary to be participating municipalities under this subsection, and the applications meet the approval criteria in paragraph (4), the Secretary shall allocate Federal funds to each applicant municipality or combination of municipalities.

(6)

Apportionment of allocated amount among participating municipalities

If the Secretary approves municipalities to be participating municipalities under this subsection, the Secretary shall apportion the full amount of the Federal funds that are allocated to that State to municipalities that are approved under this subsection in amounts proportionate to the population of those municipalities, based on the most recent available decennial census.

(7)

Approving State programs for municipalities

If the Secretary approves municipalities to be participating municipalities under this subsection, the Secretary shall take into account the additional considerations in section 206(d) in making the determination under section 205 or 206 that the State program or programs to be implemented by the participating municipalities, including a State capital access program, is eligible for Federal contributions to, or for the account of, the State program.

205.

Approving State capital access programs

(a)

Application

A participating State that establishes a new, or has an existing, State capital access program that meets the eligibility criteria in subsection (c) may apply to Secretary to have the State capital access program approved as eligible for Federal contributions to the reserve fund.

(b)

Approval

The Secretary shall approve such State capital access program as eligible for Federal contributions to the reserve fund if—

(1)

within 60 days after the date of enactment of this title, the State has filed with the Secretary a notice of intent to apply for approval by the Secretary of a State capital access program;

(2)

within 9 months after the date of enactment of this title, the State has filed with the Secretary a complete application for approval by the Secretary of a capital access program;

(3)

the State satisfies the requirements of subsections (a) and (b) of section 204; and

(4)

the State capital access program meets the eligibility criteria in subsection (c).

(c)

Eligibility criteria for State capital access programs

For a State capital access program to be approved under this section, it must be a program of the State that—

(1)

provides portfolio insurance for business loans based on a separate loan-loss reserve fund for each financial institution;

(2)

requires insurance premiums to be paid by the financial institution lenders and by the business borrowers to the reserve fund to have their loans enrolled in the reserve fund;

(3)

provides for contributions to be made by the State to the reserve fund in amounts at least equal to the sum of the amount of the insurance premium charges paid by the borrower and the financial institution to the reserve fund for any newly enrolled loan; and

(4)

provides its portfolio insurance solely for loans that meet both the following requirements:

(A)

The borrower has 500 employees or less at the time that the loan is enrolled in the Program.

(B)

The loan amount does not exceed $5,000,000.

(d)

Federal contributions to approved State capital access programs

A State capital access program approved under this section will be eligible for receiving Federal contributions to the reserve fund in an amount equal to the sum of the amount of the insurance premium charges paid by the borrowers and by the financial institution to the reserve fund for loans that meet the requirements in subsection (c)(4). A participating State may use the Federal contribution to make its contribution to the reserve fund of an approved State capital access program.

(e)

Minimum program requirements for State capital access programs

The Secretary shall, by regulation or other guidance, prescribe Program requirements that meet the following minimum requirements:

(1)

Experience and capacity

The participating State shall determine for each financial institution that participates in the State capital access program, after consultation with the appropriate Federal banking agency or, in the case of a financial institution that is a non depository community development financial institution, the Community Development Financial Institution Fund, that the financial institution has sufficient commercial lending experience and financial and managerial capacity to participate in the approved State capital access program. The determination by the State shall not be reviewable by the Secretary.

(2)

Investment authority

Subject to applicable State law, the participating State may invest, or cause to be invested, funds held in a reserve fund by establishing a deposit account at the financial institution lender in the name of the participating State. In the event that funds in the reserve fund are not deposited in such an account, such funds shall be invested in a form that the participating State determines is safe and liquid.

(3)

Loan terms and conditions to be determined by agreement

A loan to be filed for enrollment in an approved State capital access program may be made with such interest rate, fees, and other terms and conditions, and the loan may be enrolled in the approved State capital access program and claims may be filed and paid, as agreed upon by the financial institution lender and the borrower, consistent with applicable law.

(4)

Lender capital at-risk

A loan to be filed for enrollment in the State capital access program must require the financial institution lender to have a meaningful amount of its own capital resources at risk in the loan.

(5)

Premium charges minimum and maximum amounts

The insurance premium charges payable to the reserve fund by the borrower and the financial institution lender shall be prescribed by the financial institution lender, within minimum and maximum limits that require that the sum of the insurance premium charges paid in connection with a loan by the borrower and the financial institution lender may not be less than 2 percent nor more than 7 percent of the amount of the loan enrolled in the approved State capital access program.

(6)

State contributions

In enrolling a loan in an approved State capital access program, the participating State may make a contribution to the reserve fund to supplement Federal contributions made under this Program.

(7)

Loan purpose

(A)

Particular loan purpose requirements and prohibitions

In connection with the filing of a loan for enrollment in an approved State capital access program, the financial institution lender—

(i)

shall obtain an assurance from each borrower that—

(I)

the proceeds of the loan will be used for a business purpose;

(II)

the loan will not be used to finance such business activities as the Secretary, by regulation, may proscribe as prohibited loan purposes for enrollment in an approved State capital access program; and

(III)

the borrower is not—

(aa)

an executive officer, director, or principal shareholder of the financial institution lender;

(bb)

a member of the immediate family of an executive officer, director, or principal shareholder of the financial institution lender; or

(cc)

a related interest of any such executive officer, director, principal shareholder, or member of the immediate family;

(ii)

shall provide assurances to the participating State that the loan has not been made in order to place under the protection of the approved State capital access program prior debt that is not covered under the approved State capital access program and that is or was owed by the borrower to the financial institution lender or to an affiliate of the financial institution lender;

(iii)

shall not allow the enrollment of a loan to a borrower that is a refinancing of a loan previously made to that borrower by the financial institution lender or an affiliate of the financial institution lender; and

(iv)

may include additional restrictions on the eligibility of loans or borrowers that are not inconsistent with the provisions and purposes of this title, including compliance with all applicable Federal and State laws, regulations, ordinances, and Executive orders.

(B)

Definitions

For purposes of this subsection, the terms executive officer, director, principal shareholder, immediate family, and related interest refer to the same relationship to a financial institution lender as the relationship described in part 215 of title 12 of the Code of Federal Regulations, or any successor to such part.

206.

Approving collateral support and other innovative credit access and guarantee initiatives for small businesses and manufacturers

(a)

Application

A participating State that establishes a new, or has an existing, credit support program that meets the eligibility criteria in subsection (c) may apply to the Secretary to have the State other credit support program approved as eligible for Federal contributions to, or for the account of, the State program.

(b)

Approval

The Secretary shall approve such State other credit support program as eligible for Federal contributions to, or for the account of, the program if—

(1)

the Secretary determines that the State satisfies the requirements of paragraphs (1) through (3) of section 205(b);

(2)

the Secretary determines that the State other credit support program meets the eligibility criteria in subsection (c);

(3)

the Secretary determines the State other credit support program to be eligible based on the additional considerations in subsection (d); and

(4)

within 9 months after the date of enactment of this title, the State has filed with Treasury a complete application for Treasury approval.

(c)

Eligibility criteria for State other credit support programs

For a State other credit support program to be approved under this section, it must be a program of the State that—

(1)

can demonstrate that, at a minimum, 1 dollar of public investment by the State program will cause and result in 1 dollar of new private credit;

(2)

can demonstrate a reasonable expectation that, when considered with all other State programs of the State, such State programs together have the ability to use amounts of new Federal contributions to, or for the account of, all such programs in the State to cause and result in amounts of new small business lending at least 10 times the new Federal contribution amount;

(3)

for those State other credit support programs that provide their credit support through 1 or more financial institution lenders, requires the financial institution lenders to have a meaningful amount of their own capital resources at risk in their small business lending; and

(4)

extends credit support that—

(A)

targets an average borrower size of 500 employees or less;

(B)

does not extend credit support to borrowers that have more than 750 employees;

(C)

targets support towards loans with an average principal amount of $5,000,000 or less; and

(D)

does not extend credit support to loans that exceed a principal amount of $20,000,000.

(d)

Additional considerations

In making a determination that a State other credit support program is eligible for Federal contributions to, or for the account of, the State program, the Secretary shall take into account the following additional considerations:

(1)

The anticipated benefits to the State, its businesses, and its residents to be derived from the Federal contributions to, or for the account of, the approved State other credit support program, including the extent to which resulting small business lending will expand economic opportunities.

(2)

The operational capacity, skills, and experience of the management team of the State other credit support program.

(3)

The capacity of the State other credit support program to manage increases in the volume of its small business lending.

(4)

The internal accounting and administrative controls systems of the State other credit support program, and the extent to which they can provide reasonable assurance that funds of the State program are safeguarded against waste, loss, unauthorized use, or misappropriation.

(5)

The soundness of the program design and implementation plan of the State other credit support program.

(e)

Federal contributions to approved State other credit support programs

A State other credit support program approved under this section will be eligible for receiving Federal contributions to, or for the account of, the State program in an amount consistent with the schedule describing the apportionment of allocated Federal funds among State programs delivered by the State to the Secretary under the allocation agreement.

(f)

Minimum program requirements for State other credit support programs

(1)

Fund to prescribe

The Secretary shall, by regulation or other guidance, prescribe Program requirements for approved State other credit support programs.

(2)

Considerations for fund

In prescribing minimum Program requirements for approved State other credit support programs, the Secretary shall take into consideration, to the extent the Secretary determines applicable and appropriate, the minimum Program requirements for approved State capital access programs in section 205(e).

207.

Reports

(a)

Quarterly use-of-funds report

(1)

In general

Not later than 30 days after the beginning of each calendar quarter, beginning after the first full calendar quarter to occur after the date the Secretary approves a State for participation, the participating State shall submit to the Secretary a report on the use of Federal funding by the participating State during the previous calendar quarter.

(2)

Report contents

The report shall—

(A)

indicate the total amount of Federal funding used by the participating State;

(B)

include a certification by the participating State that—

(i)

the information provided in accordance with subparagraph (A) is accurate;

(ii)

funds continue to be available and legally committed to contributions by the State to, or for the account of, approved State programs, less any amount that has been contributed by the State to, or for the account of, approved State programs subsequent to the State being approved for participation in the Program; and

(iii)

the participating State is implementing its approved State program or programs in accordance with this title and regulations issued pursuant to section 210.

(b)

Annual report

Not later than March 31 of each year, beginning March 31, 2011, each participating State shall submit to the Secretary an annual report that shall include the following information:

(1)

The number of borrowers that received new loans originated under the approved State program or programs after the State program was approved as eligible for Federal contributions.

(2)

The total amount of such new loans.

(3)

Breakdowns by industry type, loan size, annual sales, and number of employees of the borrowers that received such new loans.

(4)

The zip code of each borrower that received such a new loan.

(5)

Such other data as the Secretary, in the Secretary’s sole discretion, may require to carry out the purposes of the Program.

(c)

Form

The reports and data filed pursuant to subsections (a) and (b) shall be in such form as the Secretary, in the Secretary’s sole discretion, may require.

(d)

Termination of reporting requirements

The requirement to submit reports under subsections (a) and (b) shall terminate for a participating State with the submission of the completed reports due on the first March 31 to occur after 5 complete 12-month periods after the State is approved by the Secretary to be a participating State.

208.

Remedies for State program termination or failures

(a)

Remedies

(1)

In general

If any of the events listed in paragraph (2) occur, the Secretary, in the Secretary’s discretion, may—

(A)

reduce the amount of Federal funds allocated to the State under the Program; or

(B)

terminate any further transfers of allocated amounts that have not yet been transferred to the State.

(2)

Causal events

The events referred to in paragraph (1) are—

(A)

termination by a participating State of its participation in the Program;

(B)

failure on the part of a participating State to submit complete reports under section 207 on a timely basis; or

(C)

noncompliance by the State with the terms of the allocation agreement between the Secretary and the State.

(b)

Deallocated amounts to be reallocated

If, after 13 months, any portion of the amount of Federal funds allocated to a participating State is deemed by the Secretary to be no longer allocated to the State after actions taken by the Secretary under subsection (a)(1), the Secretary shall reallocate that portion among the participating States, excluding the State whose allocated funds were deemed to be no longer allocated, as provided in section 203(b).

209.

Implementation and administration

(a)

General authorities and duties

The Secretary shall—

(1)

consult with the Administrator of the Small Business Administration and the appropriate Federal banking agencies on the administration of the Program;

(2)

establish minimum national standards for approved State programs;

(3)

provide technical assistance to States for starting State programs and generally disseminate best practices;

(4)

manage, administer, and perform necessary program integrity functions for the Program; and

(5)

ensure adequate oversight of the approved State programs, including oversight of the cash flows, performance, and compliance of each approved State program.

(b)

Authorization of appropriations

There are authorized to be appropriated to the Secretary, out of funds in the Treasury not otherwise appropriated, $2,000,000,000 to carry out the Program, including to pay reasonable costs of administering the Program.

(c)

Termination of secretary’s program administration functions

The authorities and duties of the Secretary to implement and administer the Program shall terminate at the end of the 7-year period beginning on the date of enactment of this title.

210.

Regulations

The Secretary, in consultation with the Administrator of the Small Business Administration, shall issue such regulations and other guidance as the Secretary determines necessary or appropriate to implement this title including, but not limited to, to define terms, to establish compliance and reporting requirements, and such other terms and conditions necessary to carry out the purposes of this title.

211.

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 use of funds made available 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, as such term is defined under section 3(1), containing the results of such audit.

May 27, 2010

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed