Small Business Credit Liquidity Act of 2003 - Amends the Small Business Investment Act of 1958 to authorize the Small Business Administration (SBA), in order to encourage lenders to increase the availability of small business financing by improving lender access to reasonable funding sources, to provide a credit enhancement guarantee of, or a commitment to guarantee, a portion of the principal and interest on securities issued and managed by not less than two qualified entities authorized and approved by the SBA. Requires the SBA to set and maintain standards for qualified entities, including standards relating to delinquency, default, liquidation, and loss rates.
Makes the SBA's credit enhancement guarantees second-loss guarantees, available only after the full payment of guarantees offered by the qualified entities authorized to act as issuers and managers of pools or trusts of loans. Provides loan pool or trust requirements and credit enhancement limits for FY 2004 through 2006. Directs the SBA to charge and collect a fee from issuers based on the SBA's guaranteed amount of issued securities.
[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1713 Introduced in Senate (IS)]
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 non-SBA 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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Credit Liquidity Act
of 2003''.
SEC. 2. PILOT PROGRAM FOR GUARANTEES ON POOLS OF NON-SBA LOANS.
Title IV of the Small Business Investment Act of 1958 (15 U.S.C.
692 et seq.) is amended by adding at the end the following:
``Part C--Credit Enhancement Guarantees
``Sec. 420. (a)(1) The Administration is authorized, upon such
terms and conditions as it may prescribe, in order to encourage lenders
to increase the availability of small business financing by improving
such lenders' access to reasonable sources of funding, to provide a
credit enhancement guarantee, or commitment to guarantee, of the timely
payment of a portion of the principal and interest on securities issued
and managed by not less than 2 qualified entities authorized and
approved by the Administration.
``(2) The entities authorized under this subsection to act as
issuers and managers of pools or trusts of loans shall be well-
capitalized, as defined by the Administration, and shall maintain
sufficient reserves to allow securities to be issued representing
interests in each pool or trust that are rated as investment grade by a
nationally-recognized rating agency.
``(3) The authority of the entities authorized under this
subsection shall be reviewed annually by the Administration and may be
renewed upon the satisfactory completion of such review.
``(4) The Administration shall set and maintain standards for
entities authorized under this subsection, including standards relating
to delinquency, default, liquidation, and loss rates.
``(5) If an entity authorized under this subsection fails to meet
the standards set pursuant to paragraph (4), the Administration may
terminate the entity's participation in the pilot program under this
subsection.
``(b)(1)(A) The Administration may provide its credit enhancement
guarantees in respect of securities that represent interests in, or
other obligations issued by, a trust, pool, or other entity whose
assets (other than the Administration's credit enhancement guarantee
and credit enhancements provided by other parties) consist of loans
made to small business concerns.
``(B) As used in this paragraph, the term `small business concern'
has the meaning given that term in either the Small Business Act (15
U.S.C. 631 et seq.) or this Act (15 U.S.C. 661 et seq.).
``(2) The credit enhancement guarantees provided by the
Administration under paragraph (1) shall be second-loss guarantees that
are only available after the full payment of credit enhancement
guarantees offered by the entities authorized to act as issuers and
managers of pools or trusts of loans under this section.
``(3) A pool or trust of loans shall not be eligible for guarantees
under this section--
``(A) if the value of such loans exceeds $350,000,000 in
fiscal year 2004;
``(B) if the value of such loans exceeds $400,000,000 in
fiscal year 2005; or
``(C) if the value of such loans exceeds $450,000,000 in
fiscal year 2006.
``(4) All loans under paragraph (1) shall be originated, purchased,
or assembled and managed consistent with requirements prescribed by the
Administration in connection with this credit enhancement guarantee
program.
``(5) The Administration shall prescribe requirements to be
observed by the issuers and managers of the securities covered by
credit enhancement guarantees to ensure the safety and soundness of the
credit enhancement guarantee program.
``(c) The full faith and credit of the United States is pledged to
the payment of all amounts the Administration may be required to pay as
a result of credit enhancement guarantees under this section.
``(d)(1) The Administration may issue credit enhancement guarantees
in an amount--
``(A) not to exceed $2,100,000,000 in fiscal year 2004;
``(B) not to exceed $3,250,000,000 in fiscal year 2005; and
``(C) not to exceed $4,500,000,000 in fiscal year 2006.
``(2) The Administration shall set the percentage and priority of
each credit enhancement guarantee on issued securities at a level not
to exceed 25 percent of the value of the securities so that the amount
of the Administration's anticipated net loss (if any) as a result of
such guarantee is fully reserved in a credit subsidy account funded
wholly by fees collected by the Administration from the issuers or
managers of the pool or trust.
``(3) The Administration shall charge and collect a fee from the
issuer based on the Administration's guaranteed amount of issued
securities, and the amount of such fee shall equal the estimated credit
subsidy cost of the Administration's credit enhancement guarantee.
``(4) The fees provided for under this subsection shall be adjusted
annually, as necessary, by the Administration.
``(5) The Federal government shall not appropriate any funds to
finance credit enhancement guarantees under this section.
``(e) Report and Analysis.--
``(1) Report.--
``(A) In general.--During the development and
implementation of the pilot program, the Administrator
shall submit a report on the status of the pilot
program under this section to Congress in each annual
budget request and performance plan.
``(B) Contents.--The report submitted under
subparagraph (A) shall include, among other items,
information about the loans in the pools or trusts,
including delinquency, default, loss, and recovery
rates.
``(2) Analysis and report.--Not later than December 30,
2005, the Comptroller General shall--
``(A) conduct an analysis of the pilot program
under this section; and
``(B) submit a report to Congress that contains a
summary of the analysis conducted under subparagraph
(A) and a description of any effects, not attributable
to other causes, of the pilot program on the lending
programs under section 7(a) of the Small Business Act
(15 U.S.C. 636(a)) and title V of this Act.
``(3) Implementation.--
``(A) Report.--After completing operational
guidelines to carry out the pilot program under this
section, the Administration shall submit a report,
which describes the method in which the pilot program
will be implemented, to--
``(i) the Committee on Small Business and
Entrepreneurship of the Senate; and
``(ii) the Committee on Small Business of
the House of Representatives.
``(B) Timing.--The Administration shall not
implement the pilot program under this section until
the date that is 50 days after the report has been
submitted under subparagraph (A).
``(f) Sunset Provision.--This section shall remain in effect until
September 30, 2006.''.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S12458-12460)
Read twice and referred to the Committee on Small Business and Entrepreneurship. (text of measure as introduced: CR S12460-12461)
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