12 U.S.C. § 4741 — Findings and purposes

Page 1748 TITLE 12—BANKS AND BANKING § 4741 (1) to make financial assistance available from the Fund in order to help community de- velopment financial institutions defray the costs of operating small dollar loan programs, by providing the amounts necessary for such institutions to establish their own loan loss reserve funds to mitigate some of the losses on such small dollar loan programs; and (2) to encourage community development fi- nancial institutions to establish and maintain small dollar loan programs that would help give consumers access to mainstream finan- cial institutions and combat high cost small dollar lending. (b) Grants (1) Loan-loss reserve fund grants The Fund shall make grants to community development financial institutions or to any partnership between such community develop- ment financial institutions and any other fed- erally insured depository institution with a primary mission to serve targeted investment areas, as such areas are defined under section 4702(16) of this title, to enable such institu- tions or any partnership of such institutions to establish a loan-loss reserve fund in order to defray the costs of a small dollar loan pro- gram established or maintained by such insti- tution. (2) Matching requirement A community development financial institu- tion or any partnership of institutions estab- lished pursuant to paragraph (1) shall provide non-Federal matching funds in an amount equal to 50 percent of the amount of any grant received under this section. (3) Use of funds Any grant amounts received by a commu- nity development financial institution or any partnership between or among such institu- tions under paragraph (1)— (A) may not be used by such institution to provide direct loans to consumers; (B) may be used by such institution to help recapture a portion or all of a defaulted loan made under the small dollar loan program of such institution; and (C) may be used to designate and utilize a fiscal agent for services normally provided by such an agent. (4) Technical assistance grants The Fund shall make technical assistance grants to community development financial institutions or any partnership between or among such institutions to support and main- tain a small dollar loan program. Any grant amounts received under this paragraph may be used for technology, staff support, and other costs associated with establishing a small dol- lar loan program. (c) Definitions For purposes of this section— (1) the term ‘‘consumer reporting agency that compiles and maintains files on con- sumers on a nationwide basis’’ has the same meaning given such term in section 1681a(p) of title 15; and (2) the term ‘‘small dollar loan program’’ means a loan program wherein a community development financial institution or any part- nership between or among such institutions offers loans to consumers that— (A) are made in amounts not exceeding $2,500; (B) must be repaid in installments; (C) have no pre-payment penalty; (D) the institution has to report payments regarding the loan to at least 1 of the con- sumer reporting agencies that compiles and maintains files on consumers on a nation- wide basis; and (E) meet any other affordability require- ments as may be established by the Admin- istrator. (Pub. L. 103–325, title I, § 122, as added Pub. L. 111–203, title XII, § 1206, July 21, 2010, 124 Stat. 2131.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of this title. SUBCHAPTER II—SMALL BUSINESS CAPITAL ENHANCEMENT § 4741. Findings and purposes (a) Findings The Congress finds that— (1) small business concerns are a vital part of the economy, accounting for the majority of new jobs, new products, and new services created in the United States; (2) adequate access to debt capital is a crit- ical component for small business develop- ment, productivity, expansion, and success in the United States; (3) commercial banks are the most impor- tant suppliers of debt capital to small business concerns in the United States; (4) commercial banks and other depository institutions have various incentives to mini- mize their risk in financing small business concerns; (5) as a result of such incentives, many small business concerns with economically sound fi- nancing needs are unable to obtain access to needed debt capital; (6) the small business capital access pro- grams implemented by certain States are a flexible and efficient tool to assist financial institutions in providing access to needed debt capital for many small business concerns in a manner consistent with safety and soundness regulations; (7) a small business capital access program would complement other programs which as- sist small business concerns in obtaining ac- cess to capital; and (8) Federal policy can stimulate and accel- erate efforts by States to implement small business capital access programs by providing an incentive to States, while leaving the ad- ministration of such programs to each partici- pating State. Page 1749 TITLE 12—BANKS AND BANKING § 4741 (b) Purposes By encouraging States to implement adminis- tratively efficient capital access programs that encourage commercial banks and other deposi- tory institutions to provide access to debt cap- ital for a broad portfolio of small business con- cerns, and thereby promote a more efficient and effective debt market, the purposes of this sub- chapter are— (1) to promote economic opportunity and growth; (2) to create jobs; (3) to promote economic efficiency; (4) to enhance productivity; and (5) to spur innovation. (Pub. L. 103–325, title II, § 251, Sept. 23, 1994, 108 Stat. 2203.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 103–325, title II, § 261, Sept. 23, 1994, 108 Stat. 2214, provided that: ‘‘This subtitle [subtitle B (§§ 251–261) of title II of Pub. L. 103–325, enacting this subchapter] shall become effective on January 6, 1996.’’ SMALL BUSINESS LENDING FUND Pub. L. 111–240, title IV, subtitle A, Sept. 27, 2010, 124 Stat. 2582, as amended by Pub. L. 113–188, title IX, § 901(e), Nov. 26, 2014, 128 Stat. 2020, provided that: ‘‘SEC. 4101. PURPOSE. ‘‘The purpose of this subtitle is to address the ongo- ing effects of the financial crisis on small businesses by providing temporary authority to the Secretary of the Treasury to make capital investments in eligible insti- tutions in order to increase the availability of credit for small businesses. ‘‘SEC. 4102. DEFINITIONS. ‘‘For purposes of this subtitle: ‘‘(1) APPROPRIATE COMMITTEES OF CONGRESS.—The term ‘appropriate committees of Congress’ means— ‘‘(A) the Committee on Small Business and Entre- preneurship, the Committee on Agriculture, Nutri- tion, and Forestry, the Committee on Banking, Housing, and Urban Affairs, the Committee on Fi- nance, the Committee on the Budget, and the Com- mittee on Appropriations of the Senate; and ‘‘(B) the Committee on Small Business, the Com- mittee 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 hold- ing 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 Sys- tem, and the Federal Deposit Insurance Corpora- tion; ‘‘(B) the Office of Thrift Supervision Thrift Fi- nancial Report; ‘‘(C) any report that is designated by the Office of the Comptroller of the Currency, the Board of Gov- ernors 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); ‘‘(D) reports of Condition and Income as des- ignated through guidance developed by the Sec- retary, in consultation with the Director of the Community Development Financial Institutions Fund; and ‘‘(E) with respect to an eligible institution for which no report exists that is described under sub- paragraph (A), (B), (C), or (D), such other report or set of information as the Secretary, in consultation with the Administrator of the Small Business Ad- ministration, may prescribe. ‘‘(5) CDCI.—The term ‘CDCI’ means the Community Development Capital Initiative created by the Sec- retary under the Troubled Asset Relief Program es- tablished by the Emergency Economic Stabilization Act of 2008 [div. A of Pub. L. 110–343, see Short Title note set out under section 5201 of this title]. ‘‘(6) CDCI INVESTMENT.—The term ‘CDCI invest- ment’ 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) CDFI; COMMUNITY DEVELOPMENT FINANCIAL IN- STITUTION.—The terms ‘CDFI’ and ‘community devel- opment financial institution’ have the meaning given the term ‘community development financial institu- tion’ under the Riegle Community Development and Regulatory Improvement Act of 1994 [Pub. L. 103–325, see Tables for classification]. ‘‘(8) CDLF; COMMUNITY DEVELOPMENT LOAN FUND.— The terms ‘CDLF’ and ‘community development loan fund’ mean any entity that— ‘‘(A) is certified by the Department of the Treas- ury as a community development financial institu- tion loan fund; ‘‘(B) is exempt from taxation under the Internal Revenue Code of 1986 [26 U.S.C. 1 et seq.]; and ‘‘(C) had assets less than or equal to $10,000,000,000 as of the end of the fourth quarter of calendar year 2009. ‘‘(9) CPP.—The term ‘CPP’ means the Capital Pur- chase Program created by the Secretary under the Troubled Asset Relief Program established by the Emergency Economic Stabilization Act of 2008. ‘‘(10) CPP INVESTMENT.—The term ‘CPP investment’ means, with respect to any eligible institution, the principal amount of any investment made by the Sec- retary in such eligible institution under the CPP that has not been repaid. ‘‘(11) ELIGIBLE INSTITUTION.—The term ‘eligible in- stitution’ means— ‘‘(A) any insured depository institution, which— ‘‘(i) is not controlled by a bank holding com- pany 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 of the insured depository institution 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 con- solidated assets of more than $10,000,000,000, as so reported; ‘‘(B) any bank holding company which has total consolidated assets of equal to or less than $10,000,000,000, as reported in the call report of the bank holding company as of the end of the fourth quarter of calendar year 2009; ‘‘(C) any savings and loan holding company which has total consolidated assets of equal to or less than $10,000,000,000, as reported in the call report of the savings and loan holding company as of the end of the fourth quarter of calendar year 2009; and ‘‘(D) any community development financial insti- tution loan fund which has total assets of equal to or less than $10,000,000,000, as reported in audited fi- nancial statements for the fiscal year of the com- munity development financial institution loan fund that ends in calendar year 2009. ‘‘(12) FUND.—The term ‘Fund’ means the Small Business Lending Fund established under section 4103(a)(1). Page 1750 TITLE 12—BANKS AND BANKING § 4741 ‘‘(13) 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)). ‘‘(14) MINORITY-OWNED AND WOMEN-OWNED BUSI- NESS.—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)). ‘‘(15) PROGRAM.—The term ‘Program’ means the Small Business Lending Fund Program authorized under section 4103(a)(2). ‘‘(16) 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)). ‘‘(17) SECRETARY.—The term ‘Secretary’ means the Secretary of the Treasury. ‘‘(18) SMALL BUSINESS LENDING.— ‘‘(A) IN GENERAL.—The term ‘small business lend- ing’ means lending, as defined by and reported in an eligible institutions’ quarterly call report, where each loan comprising such lending is one of the fol- lowing types: ‘‘(i) Commercial and industrial loans. ‘‘(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) EXCLUSION.—No loan that has an original amount greater than $10,000,000 or that goes to a business with more than $50,000,000 in revenues shall be included in the measure. ‘‘(C) 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 meas- ured based on the combined small business lending reported in the call report of the insured depository institution subsidiaries. ‘‘(19) VETERAN-OWNED BUSINESS.— ‘‘(A) The term ‘veteran-owned business’ means a business— ‘‘(i) more than 50 percent of the ownership or control of which is held by 1 or more veterans; ‘‘(ii) more than 50 percent of the net profit or loss of which accrues to 1 or more veterans; and ‘‘(iii) a significant percentage of senior manage- ment positions of which are held by veterans. ‘‘(B) For purposes of this paragraph, the term ‘veteran’ has the meaning given such term in sec- tion 101(2) of title 38, United States Code. ‘‘SEC. 4103. 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 au- thorized to establish the Small Business Lending Fund Program for using the Fund consistent with this subtitle. ‘‘(b) USE OF FUND.— ‘‘(1) IN GENERAL.—Subject to paragraph (2), the Fund shall be available to the Secretary, without fur- ther appropriation or fiscal year limitation, for the costs of purchases (including commitments to pur- chase), and modifications of such purchases, of pre- ferred stock and other financial instruments from eli- gible institutions on such terms and conditions as are determined by the Secretary in accordance with this subtitle. For purposes of this paragraph and with re- spect to an eligible institution, the term ‘other finan- cial instruments’ shall include only debt instruments for which such eligible institution is fully liable or equity equivalent capital of the eligible institution. Such debt instruments may be subordinated to the claims of other creditors of the eligible institution. ‘‘(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 reduc- tion of the public debt. ‘‘(4) LIMITATION ON PURCHASES FROM CDLFS.— ‘‘(A) IN GENERAL.—Not more than 1 percent of the maximum purchase limit of the Program, pursuant to paragraph (2), may be used to make purchases from community development loan funds. ‘‘(B) ELIGIBILITY STANDARDS.—The Secretary, in consultation with the Community Development Fi- nancial Institutions Fund, shall develop eligibility criteria to determine the financial ability of a CDLF to participate in the Program and repay the investment. Such criteria shall include the fol- lowing: ‘‘(i) Ratio of net assets to total assets is at least 20 percent. ‘‘(ii) Ratio of loan loss reserves to loans and leases 90 days or more delinquent (including loans sold with full recourse) is at least 30 percent. ‘‘(iii) Positive net income measured on a 3-year rolling average. ‘‘(iv) Operating liquidity ratio of at least 1.0 for the 4 most recent quarters and for one or both of the two preceding years. ‘‘(v) Ratio of loans and leases 90 days or more delinquent (including loans sold with full re- course) to total equity plus loan loss reserves is less than 40 percent. ‘‘(C) REQUIREMENT TO SUBMIT AUDITED FINANCIAL STATEMENTS.—CDLFs participating in the Program shall submit audited financial statements to the Secretary, have a clean audit opinion, and have at least 3 years of operating experience. ‘‘(c) CREDITS TO THE FUND.—There shall be credited to the Fund amounts made available pursuant to section 4108, 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 ex- ceeding 5 percent of risk-weighted assets, as re- ported in the call report immediately preceding the date of application, less the amount of any CDCI in- vestment and any CPP investment. ‘‘(B) INSTITUTIONS WITH ASSETS OF MORE THAN $1,000,000,000 AND LESS THAN OR EQUAL TO $10,000,000,000.—Eligible institutions having total as- sets 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 ex- ceeding 3 percent of risk-weighted assets, as re- ported in the call report immediately preceding the date of application, less the amount of any CDCI in- vestment and any CPP investment. ‘‘(C) TREATMENT OF HOLDING COMPANIES.—In the case of an eligible institution that is a bank hold- ing company or a savings and loan holding com- pany having one or more insured depository insti- tution 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 as- Page 1751 TITLE 12—BANKS AND BANKING § 4741 sets of the insured depository institution subsidi- aries as reported in the call report immediately preceding the date of application. ‘‘(D) TREATMENT OF APPLICANTS THAT ARE INSTITU- TIONS CONTROLLED BY HOLDING COMPANIES.—If an eli- gible 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 com- pany or savings and loan holding company of such eligible institution, as applicable. For purposes of this subparagraph, 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 subparagraph, 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 sub- mits an application to the Secretary for a capital investment under the Program, the applicant shall deliver to the appropriate Federal banking agency, and, for applicants that are State-chartered banks, to the appropriate State banking regulator, a small business lending plan describing how the appli- cant’s business strategy and operating goals will allow it to address the needs of small businesses in the areas it serves, as well as a plan to provide lin- guistically and culturally appropriate outreach, where appropriate. In the case of eligible institu- tions that are community development loan funds, this plan shall be submitted to the Secretary. This plan shall be confidential supervisory information. ‘‘(F) TREATMENT OF APPLICANTS THAT ARE COMMU- NITY DEVELOPMENT LOAN FUNDS.—Eligible institu- tions that are community development loan funds may apply to receive a capital investment from the Fund in an amount not exceeding 5 percent of total assets, as reported in the audited financial state- ments for the fiscal year of the eligible institution that ends in calendar year 2009. ‘‘(2) CONSULTATION WITH REGULATORS.—For each eli- gible institution that applies to receive a capital in- vestment under the Program, the Secretary shall— ‘‘(A) consult with the appropriate Federal bank- ing agency or, in the case of an eligible institution that is a nondepository community development fi- nancial institution, the Community Development Financial Institution Fund, for the eligible institu- tion, to determine whether the eligible institution may receive such capital investment; ‘‘(B) in the case of an eligible institution that is a State-chartered bank, consider any views re- ceived from the State banking regulator of the State of the eligible institution regarding the fi- nancial condition of the eligible institution; and ‘‘(C) in the case of a community development fi- nancial institution loan fund, consult with the Community Development Financial Institution Fund. ‘‘(3) CONSIDERATION OF MATCHED PRIVATE INVEST- MENTS.— ‘‘(A) IN GENERAL.—For an eligible institution that applies to receive a capital investment under the Program, if the entity to be consulted under para- graph (2) would not otherwise recommend the eligi- ble institution to receive the capital investment, the Secretary, in consultation with the entity to be so consulted, may consider whether the entity to be consulted would recommend the eligible institution to receive a capital investment based on the finan- cial condition of the institution if the conditions in subparagraph (B) are satisfied. ‘‘(B) CONDITIONS.—The conditions referred to in subparagraph (A) are as follows: ‘‘(i) CAPITAL SOURCES.—The eligible institution shall receive capital both under the Program and from private, nongovernment investors. ‘‘(ii) AMOUNT OF CAPITAL.—The amount of cap- ital to be received under the Program shall not exceed 3 percent of risk-weighted assets, as re- ported in the call report immediately preceding the date of application, less the amount of any CDCI investment and any CPP investment. ‘‘(iii) TERMS.—The amount of capital to be re- ceived from private, nongovernment investors shall be— ‘‘(I) equal to or greater than 100 percent of the capital to be received under the Program; and ‘‘(II) subordinate to the capital investment made by the Secretary under the Program. ‘‘(4) 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) CONSTRUCTION.—Nothing in subparagraph (A) shall be construed as limiting the discretion of the Secretary to deny the application of an eligible in- stitution that is not on the FDIC problem bank list. ‘‘(C) FDIC PROBLEM BANK LIST DEFINED.—For pur- poses of this paragraph, the term ‘FDIC problem bank list’ means the list of depository institutions having a current rating of 4 or 5 under the Uniform Financial Institutions Rating System, or such other list designated by the Federal Deposit Insur- ance Corporation. ‘‘(5) INCENTIVES TO LEND.— ‘‘(A) REQUIREMENTS ON PREFERRED STOCK AND OTHER FINANCIAL INSTRUMENTS.—Any preferred stock or other financial instrument issued to Treas- ury by an eligible institution receiving a capital in- vestment 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 average amount of small business lending reported by the eligible in- stitution in its call reports for the 4 full quarters immediately preceding the date of enactment of this Act [Sept. 27, 2010], 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 pur- chases of loans after origination and syndica- tion; 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 divi- dend 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 inter- est rate shall be 2 percent; or Page 1752 TITLE 12—BANKS AND BANKING § 4741 ‘‘(V) if the amount of small business lending has increased by 10 percent or greater, the divi- dend 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 ad- justment shall occur in the calendar quarter fol- lowing the publication of call report data, such that the rate based on call report data from any one cal- endar quarter, which is published in the first fol- lowing 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 pay- able until the expiration of the 41⁄2-year period that begins on the date of the investment. In the case where the amount of small business lending has re- mained the same or decreased relative to the insti- tution’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 41⁄2-year period that begins on the date of the investment. ‘‘(E) RATE FOLLOWING INITIAL 41⁄2-YEAR PERIOD.— The dividend or interest rate paid on any preferred stock or other financial instrument issued by an el- igible institution that receives a capital invest- ment under the Program shall increase to 9 percent at the end of the 41⁄2-year period that begins on the date of the capital investment under the Program. ‘‘(F) LIMITATION ON RATE REDUCTIONS WITH RE- SPECT 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 institu- tions consistent with this limitation. ‘‘(G) RATE ADJUSTMENTS FOR S CORPORATION.—Be- fore making a capital investment in an eligible in- stitution that is an S corporation or a corporation organized on a mutual basis, the Secretary may ad- just 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 ac- count 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 [26 U.S.C. 1361(a)]. ‘‘(H) REPAYMENT DEADLINE.—The capital invest- ment received by an eligible institution under the Program shall be evidenced by preferred stock or other financial instrument that— ‘‘(i) includes, as a term and condition, that the capital investment will— ‘‘(I) be repaid not later than the end of the 10- year period beginning on the date of the capital investment under the Program; or ‘‘(II) at the end of such 10-year period, be sub- ject to such additional terms as the Secretary shall prescribe, which shall include a require- ment that the stock or instrument shall carry the highest dividend or interest rate payable; and ‘‘(ii) provides that the term and condition de- scribed under clause (i) shall not apply if the ap- plication of that term and condition would ad- versely affect the capital treatment of the stock or financial instrument under current or suc- cessor applicable capital provisions compared to a capital instrument with identical terms other than the term and condition described under clause (i). ‘‘(I) REQUIREMENTS ON FINANCIAL INSTRUMENTS ISSUED BY A COMMUNITY DEVELOPMENT FINANCIAL INSTITUTION LOAN FUND.—Any equity equivalent capital issued to the Treasury by a community development loan fund receiving a capital in- vestment under the Program shall provide that the rate at which interest is payable shall be 2 percent per annum for 8 years. After 8 years, the rate at which interest is payable shall be 9 percent. ‘‘(6) ADDITIONAL INCENTIVES TO REPAY.—The Sec- retary may, by regulation or guidance issued under section 4104(9), establish repayment incentives in ad- dition to the incentive in paragraph (5)(E) that will apply to new capital investments in a manner that the Secretary determines to be consistent with the purposes of this subtitle. ‘‘(7) CAPITAL PURCHASE PROGRAM REFINANCE.— ‘‘(A) IN GENERAL.—The Secretary shall, in a man- ner that the Secretary determines to be consistent with the purposes of this subtitle, 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 missed more than one dividend payment due under the CPP. For purposes of this subparagraph, a CPP div- idend payment that is submitted within 60 days of the due date of such payment shall not be consid- ered a missed dividend payment. ‘‘(8) OUTREACH TO MINORITIES, WOMEN, AND VET- ERANS.—The Secretary shall require eligible institu- tions receiving capital investments under the Pro- gram to provide linguistically and culturally appro- priate outreach and advertising in 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— ‘‘(A) represent or work within or are members of minority communities; ‘‘(B) represent or work with or are women; and ‘‘(C) represent or work with or are veterans. ‘‘(9) ADDITIONAL TERMS.—The Secretary may, by regulation or guidance issued under section 4104(9), make modifications that will apply to new capital in- vestments in order to manage risks associated with the administration of the Fund in a manner con- sistent with the purposes of this subtitle. ‘‘(10) MINIMUM UNDERWRITING STANDARDS.—The ap- propriate Federal banking agency for an eligible in- stitution that receives funds under the Program shall within 60 days issue guidance regarding prudent un- derwriting standards that must be used for loans made by the eligible institution using such funds. ‘‘SEC. 4104. ADDITIONAL AUTHORITIES OF THE SECRETARY. ‘‘The Secretary may take such actions as the Sec- retary deems necessary to carry out the authorities in this subtitle, including, without limitation, the fol- lowing: ‘‘(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, in- cluding contracts for services authorized by section 3109 of title 5, United States Code. Page 1753 TITLE 12—BANKS AND BANKING § 4741 ‘‘(3) The Secretary may designate any bank, sav- ings association, trust company, security broker or dealer, asset manager, or investment adviser as a fi- nancial agent of the Federal Government and such in- stitution shall perform all such reasonable duties re- lated to this subtitle as financial agent of the Federal Government as may be required. The Secretary shall have authority to amend existing agreements with fi- nancial agents, entered into during the 2-year period before the date of enactment of this Act [Sept. 27, 2010], to perform reasonable duties related to this subtitle. ‘‘(4) The Secretary may exercise any rights received in connection with any preferred stock or other fi- nancial instruments or assets purchased or acquired pursuant to the authorities granted under this sub- title. ‘‘(5) Subject to section 4103(b)(3), the Secretary may manage any assets purchased under this subtitle, in- cluding revenues and portfolio risks therefrom. ‘‘(6) The Secretary may sell, dispose of, transfer, ex- change or enter into securities loans, repurchase transactions, or other financial transactions in re- gard to, any preferred stock or other financial instru- ment or asset purchased or acquired under this sub- title, upon terms and conditions and at a price deter- mined by the Secretary. ‘‘(7) The Secretary may manage or prohibit con- flicts of interest that may arise in connection with the administration and execution of the authorities provided under this subtitle. ‘‘(8) The Secretary may establish and use vehicles, subject to supervision by the Secretary, to purchase, hold, and sell preferred stock or other financial in- struments 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 subtitle. ‘‘SEC. 4105. CONSIDERATIONS. ‘‘In exercising the authorities granted in this sub- title, the Secretary shall take into consideration— ‘‘(1) increasing the availability of credit for small businesses; ‘‘(2) providing funding to minority-owned eligible institutions and other eligible institutions that serve small businesses that are minority-, veteran-, 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) increasing the opportunity for small business development in areas with high unemployment rates that exceed the national average; ‘‘(5) ensuring that all eligible institutions may apply to participate in the program established under this subtitle, without discrimination based on geog- raphy; ‘‘(6) providing transparency with respect to use of funds provided under this subtitle; ‘‘(7) minimizing the cost to taxpayers of exercising the authorities; ‘‘(8) promoting and engaging in financial education to would-be borrowers; and ‘‘(9) providing funding to eligible institutions that serve small businesses directly affected by the dis- charge of oil arising from the explosion on and sink- ing of the mobile offshore drilling unit Deepwater Ho- rizon and small businesses in communities that have suffered negative economic effects as a result of that discharge with particular consideration to States along the coast of the Gulf of Mexico. ‘‘SEC. 4106. REPORTS. ‘‘The Secretary shall provide to the appropriate com- mittees of Congress— ‘‘(1) within 7 days of the end of each month com- mencing with the first month in which transactions are made under the Program, a written report de- scribing all of the transactions made during the re- porting period pursuant to the authorities granted under this subtitle; ‘‘(2) after the end of March and the end of Sep- tember, commencing September 30, 2010, a written re- port on all projected costs and liabilities, all oper- ating 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 calendar quar- ter commencing with the first calendar quarter in which transactions are made under the Program, a written report detailing how eligible institutions par- ticipating in the Program have used the funds such institutions received under the Program. ‘‘SEC. 4107. OVERSIGHT AND AUDITS. ‘‘(a) INSPECTOR GENERAL OVERSIGHT.—The Inspector General of the Department of the Treasury shall con- duct, supervise, and coordinate audits and investiga- tions of the Program through the Office of Small Busi- ness Lending Fund Program Oversight established under subsection (b). ‘‘(b) OFFICE OF SMALL BUSINESS LENDING FUND PRO- GRAM OVERSIGHT.— ‘‘(1) ESTABLISHMENT.—There is hereby established within the Office of the Inspector General of the De- partment of the Treasury a new office to be named the ‘Office of Small Business Lending Fund Program Oversight’ to provide oversight of the Program. ‘‘(2) LEADERSHIP.—The Inspector General shall ap- point a Special Deputy Inspector General for SBLF Program Oversight to lead the Office, with commen- surate staff, who shall report directly to the Inspec- tor General and who shall be responsible for the per- formance of all auditing and investigative activities relating to the Program. ‘‘(3) REPORTING.— ‘‘(A) IN GENERAL.—The Inspector General shall issue a report no less than two times a year to the Congress and the Secretary devoted to the over- sight provided by the Office, including any rec- ommendations for improvements to the Program. ‘‘(B) RECOMMENDATIONS.—With respect to any de- ficiencies identified in a report under subparagraph (A), the Secretary shall either— ‘‘(i) take actions to address such deficiencies; or ‘‘(ii) certify to the appropriate committees of Congress that no action is necessary or appro- priate. ‘‘(4) COORDINATION.—The Inspector General, in maximizing the effectiveness of the Office, shall work with other Offices of Inspector General, as appro- priate, to minimize duplication of effort and ensure comprehensive oversight of the Program. ‘‘(5) TERMINATION.—The Office shall terminate at the end of the 6-month period beginning on the date on which all capital investments are repaid under the Program or the date on which the Secretary deter- mines that any remaining capital investments will not be repaid. ‘‘(6) DEFINITIONS.—For purposes of this subsection: ‘‘(A) OFFICE.—The term ‘Office’ means the Office of Small Business Lending Fund Program Oversight established under paragraph (1). ‘‘(B) INSPECTOR GENERAL.—The term ‘Inspector General’ means the Inspector General of the De- partment of the Treasury. ‘‘(c) REQUIRED CERTIFICATIONS.— ‘‘(1) ELIGIBLE INSTITUTION CERTIFICATION.—Each eli- gible institution that participates in the Program must certify that such institution is in compliance with the requirements of section 103.121 of title 31, Code of Federal Regulations, a regulation that, at a minimum, requires financial institutions, as that term is defined in 31 U.S.C. 5312(a)(2) and (c)(1)(A), to implement reasonable procedures to verify the iden- tity of any person seeking to open an account, to the extent reasonable and practicable, maintain records Page 1754 TITLE 12—BANKS AND BANKING § 4742 of the information used to verify the person’s iden- tity, and determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency. ‘‘(2) LOAN RECIPIENTS.—With respect to funds re- ceived by an eligible institution under the Program, any business receiving a loan from the eligible insti- tution using such funds after the date of the enact- ment of this Act [Sept. 27, 2010] shall certify to such eligible institution that the principals of such busi- ness have not been convicted of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911) [now 34 U.S.C. 20911]). ‘‘(d) PROHIBITION ON PORNOGRAPHY.—None of the funds made available under this subtitle may be used to pay the salary of any individual engaged in activities related to the Program who has been officially dis- ciplined for violations of subpart G of the Standards of Ethical Conduct for Employees of the Executive Branch for viewing, downloading, or exchanging por- nography, including child pornography, on a Federal Government computer or while performing official Fed- eral Government duties. ‘‘SEC. 4108. CREDIT REFORM; FUNDING. ‘‘(a) CREDIT REFORM.—The cost of purchases of pre- ferred stock and other financial instruments made as capital investments under this subtitle shall be deter- mined as provided under the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.). ‘‘(b) FUNDS MADE AVAILABLE.—There are hereby ap- propriated, 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 eli- gible institutions, including the costs of modifying such investments, and reasonable costs of admin- istering the program of making, holding, managing, and selling the capital investments. ‘‘SEC. 4109. TERMINATION AND CONTINUATION OF AUTHORITIES. ‘‘(a) TERMINATION OF INVESTMENT AUTHORITY.—The authority to make capital investments in eligible insti- tutions, including commitments to purchase preferred stock or other instruments, provided under this sub- title shall terminate 1 year after the date of enactment of this Act [Sept. 27, 2010]. ‘‘(b) CONTINUATION OF OTHER AUTHORITIES.—The au- thorities of the Secretary under section 4104 shall not be limited by the termination date in subsection (a). ‘‘SEC. 4110. PRESERVATION OF AUTHORITY. ‘‘Nothing in this subtitle may be construed to limit the authority of the Secretary under any other provi- sion of law. ‘‘SEC. 4111. 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 [div. A of Pub. L. 110–343, see Short Title note set out under section 5201 of this title]. An institution shall not, by virtue of a capital investment under the Small Business Lending Fund Program, be considered a recipient of the Trou- bled Asset Relief Program. ‘‘(b) CHANGE IN LAW.—If, after a capital investment has been made in an eligible institution under the Pro- gram, 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 institu- tion may, after consultation with the appropriate Fed- eral banking agency for the eligible institution, repay the investment without impediment. ‘‘SEC. 4112. STUDY AND REPORT WITH RESPECT TO WOMEN-OWNED, VETERAN-OWNED, AND MI- NORITY-OWNED BUSINESSES. ‘‘(a) STUDY.—The Secretary shall conduct a study of the impact of the Program on women-owned businesses, veteran-owned businesses, and minority-owned busi- nesses. ‘‘(b) REPORT.—Not later than one year after the date of enactment of this Act [Sept. 27, 2010], the Secretary shall submit to Congress a report on the results of the study conducted pursuant to subsection (a). To the ex- tent possible, the Secretary shall disaggregate the re- sults of such study by ethnic group and gender. ‘‘(c) INFORMATION PROVIDED TO THE SECRETARY.—Eli- gible 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. ‘‘SEC. 4113. SENSE OF CONGRESS. ‘‘It is the sense of Congress that the Federal Deposit Insurance Corporation and other bank regulators are sending mixed messages to banks regarding regulatory capital requirements and lending standards, which is a contributing cause of decreased small business lending and increased regulatory uncertainty at community banks.’’ § 4742. Definitions For purposes of this subchapter— (1) the term ‘‘Fund’’ means the Community Development Financial Institutions Fund es- tablished under section 4703 of this title; (2) the term ‘‘appropriate Federal banking agency’’— (A) has the same meaning as in section 1813 of this title; and (B) includes the National Credit Union Ad- ministration Board in the case of any credit union the deposits of which are insured in accordance with the Federal Credit Union Act [12 U.S.C. 1751 et seq.]; (3) the term ‘‘early loan’’ means a loan en- rolled at a time when the aggregate covered amount of loans previously enrolled under the Program by a particular participating finan- cial institution is less than $5,000,000; (4) the term ‘‘enrolled loan’’ means a loan made by a participating financial institution that is enrolled by a participating State in ac- cordance with this subchapter; (5) the term ‘‘financial institution’’ means any federally chartered or State-chartered commercial bank, savings association, savings bank, or credit union; (6) the term ‘‘participating financial institu- tion’’ means any financial institution that has entered into a participation agreement with a participating State in accordance with section 4744 of this title; (7) the term ‘‘participating State’’ means any State that has been approved for partici- pation in the Program in accordance with sec- tion 4743 of this title; (8) the term ‘‘passive real estate ownership’’ means ownership of real estate for the purpose of deriving income from speculation, trade, or rental, except that such term shall not in- clude— (A) the ownership of that portion of real estate being used or intended to be used for the operation of the business of the owner of the real estate (other than the business of passive ownership of real estate); or (B) the ownership of real estate for the purpose of construction or renovation, until the completion of the construction or ren- ovation phase;