[S. 2286, 85th Cong., 1st sess.] A BILL To assist State programs for small business, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 207 of the Small Business Act of 1953, as amended, is hereby amended by adding the following new subsections: "(c) The Administration is empowered to purchase investment securities issued by State chartered development credit or finance corporations formed to assist, develop, and expand the economy of a State. The Administration shall not purchase investment securities in an amount in excess of the amount of such securities which are held by purchasers other than the Administration, but in no event shall the Administration purchase more than $5,000,000 of investment securities in any one State. Investment securities purchased by the Administration shall bear interest at a rate not less than the total of one-quarter of 1 per centum per annum added to the rate of interest paid by the Administration on funds obtained from the Secretary of the Treasury as provided in subsection (d) of this section, and shall have maturity dates of twenty years or less. The term 'investment securities' as used in this subsection shall mean obligations evidencing the indebtedness of any State chartered development credit or finance corporation in the form of bonds, notes, and/or debentures as may be further defined by regulations of the Administration. "(d) In order to finance activities under subsection (c) of this section, the Administration is authorized and empowered to issue to the Secretary of the Treasury, from time to time and to have outstanding at any one time, notes and other obligations in an amount not exceeding $27,500,000. Such obligations shall be in such forms and denominations, have such maturities and be subject to such terms and conditions as may be prescribed by the Administration, with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of the United States of comparable maturities as of the last day of the month preceding the issuance of such notes or other obligations. The Secretary of the Treasury is authorized and directed to purchase any notes and other obligations of the Administration to be issued hereunder, and for such purpose the Secretary of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to include any purchases of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired by him under this section. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Funds borrowed under this section and any proceeds shall constitute a revolving fund which may be used by the Administration in the exercise of its functions under subsection (c) of this section." SEC. 2. Effective one year after the date of enactment of this Act, section 13b of the Federal Reserve Act (12 U. S. C. 352a) is hereby repealed; but such repeal shall not affect the power of any Federal Reserve bank to carry out, or protect its interest under, any agreement theretofore made or transaction entered into in carrying on operations under that section. Within sixty days after the enactment of this Act, each Federal Reserve bank shall pay to the United States the aggregate amount which the Secretary of the Treasury has heretofore paid to such bank under the provisions of section 13b of the Federal Reserve Act; and such payment shall constitute a full discharge of any obligation or liability of the Federal bank to the United States or to the Secretary of the Treasury arising out of subsection (e) of said section 13b or out of any agreement thereunder. The amounts repaid to the United States pursuant to this section and any remaining balance of the funds set aside in the Treasury for payments under section 13b of the Federal Reserve Act shall be covered into miscellaneous receipts. SEC. 3. Subsection (b) of section 207 of the Small Business Act of 1953, as amended, is amended by adding the following new subparagraph: "(6) to make grants to any State government, or any agency thereof, State chartered development credit or finance corporations, land-grant colleges and universities, and colleges and schools of business, engineering, commerce, or agriculture for studies, research, and counseling concerning the managing, financing, and operation of small business enterprises and technical and statistical information necessary thereto in order to carry out the purposes of subparagraph 4 of this section by coordinating such information with existing information facilities within the State and by making such information available to State and local agencies. Only one such grant shall be made within any one State in any one year, and no such grant shall exceed an aggregate amount of $40,000. Not to exceed $2,000,000 annually shall be made available from the revolving fund provided in section 204 (b) of this Act for the purposes of this subparagraph." [S. 3191, 85th Cong., 2d sess.] A BILL to create a Small Business Capital Bank System to make available to small business a source of equity and long-term loan capital where such capital is not available on reasonable terms from existing private sources; to transfer to such system all funds which are presently available under section 13b of the Federal Reserve Act for loans to industrial and commercial firms, together with certain other funds out of the surplus accounts of the Federal Reserve banks; and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled TITLE I-SHORT TITLE, STATEMENT OF PURPOSE, AND DEFINITIONS SHORT TITLE SEC. 101. This Act, divided into titles and sections according to the following table of contents, may be cited as the "Small Business Capital Bank Act". TABLE OF CONTENTS TITLE I-SHORT TITLE, STATEMENT OF PURPOSE, AND DEFINITIONS Sec. 101. Short title. Sec. 102. Statement of purpose. Sec. 103. Definitions. TITLE II-ESTABLISHMENT OF SMALL BUSINESS CAPITAL BANK BOARD Sec. 401. Organization of associations. Sec. 402. Objectives. Sec. 403. Articles of incorporation. Sec. 404. Board of directors. Sec. 405. Secretary-treasurer. Sec. 406. Payment of expenses and salaries. Sec. 407. Capital stock. Sec. 408. Borrowing power. Sec. 409. Investment by associations in stock of banks. Sec. 410. Use of services of public agencies and private financial institutions. Sec. 411. Disposition of funds held by associations. Sec. 412. Examinations. Sec. 413. Reports. Sec. 414. Dissolution. Sec. 415. Disclaimer of United States liability on association obligations and securities. Sec. 417. Liability of associations for Federal income tax. Sec. 418. State and local taxation of associations. TITLE V-PROVISION OF ASSISTANCE TO SMALL-BUSINESS CONCERNS Sec. 501. Standards of eligibility for assistance. Sec. 502. Provision of equity capital for small-business concerns. Sec. 503. Long-term loans to small-business concerns. Sec. 504. Assistance through private investment companies and State and local development corporations. Sec. 601. Criminal penalties. TITLE VI-MISCELLANEOUS STATEMENT OF PURPOSE SEC. 102. (a) The Congress hereby finds that there is an increasing need among the small-business concerns of the United States for funds to finance their operations and to promote and facilitate their growth, expansion, and modernization; that this need must be met in the interest of a sound national economy; and that the loans which are presently available to small-business concerns from the Federal Government and from other public and private sources not only fail to meet this need but in fact, because of the burden of repayment over a relatively short period of time, frequently prevent such growth and expansion. (b) It is therefore declared to be the policy of the Congress and the purpose of this Act to improve and stimulate the national economy in general and the small-business segment thereof in particular by establishing a program under which small-business concerns in the United States can be supplied with the equity capital and long-term loan funds which they need for the sound financing of their business operations and for their growth, expansion, and modernization. DEFINITIONS SEC. 103. (a) As used in this Act (1) the term "Board" means the Small Business Capital Bank Board established by section 201; (2) the term "bank" means a small business capital bank established under section 301; (3) the term "association" means a small business investment association organized as provided in section 401; (4) the terms "district" and "small business capital bank district" mean a geological area coextensive with one of the twelve Federal Reserve districts created under section 2 of the Federal Reserve Act and existing on the date of the enactment of this Act, except that the boundaries of such districts may from time to time be readjusted by the Board after the date of the enactment of this Act to take into account more effectively the smallbusiness needs of the country; (5) the term "trading area" means a business community embracing an entire metropolitan area (as defined by the Board), or a geographical area embracing a number of municipalities when such a designation is determined by the Board to be necessary and appropriate in order to include all of an integrated business and commercial community; and (6) the terms "State" and (when used in a geographical sense) "United States" include the several States, the Territories of Alaska and Hawaii, the District of Columbia, and the Commonwealth of Puerto Rico. (b) (1) As used in this Act, the term "small-business concern" means a business concern, incorporated or unincorporated, which is not dominant in a wellestablished industry or line of business, and which meets the more detailed standards and criteria prescribed by the Board under paragraph (2). (2) As soon as practicable after the date of the enactment of this Act, the Board shall prescribe detailed standards and criteria for the definition of the term "small-business concern," which standards and criteria may be based upon, but shall not be limited to, such things as number of employees, assets, volume of sales, and other factors related to the concern's relative position in its industry or line of business. (3) The Board shall from time to time revise such standards and criteria to the extent necessary to take into account more accurately and realistically the relationship of small-business operations to the economy as a whole. Whenever such standards and criteria have been prescribed or revised with respect to any industry or line of business, the definition shall be published in the Federal Register, and for purposes of this Act shall thereafter remain in effect with respect to such industry or line of business until subsequently revised and published by the Board in accordance with the same standards and procedures as those which were applicable when it was originally prescribed. TITLE II-ESTABLISHMENT OF SMALL BUSINESS CAPITAL BANK BOARD ESTABLISHMENT OF THE BOARD SEC. 201. There is hereby established, as an independent agency of the Government of the United States, a Small Business Capital Bank Board. The principal office of the Board shall be located in the District of Columbia, but the Board may establish such district and branch offices throughout the United States as it deems necessary and appropriate. MEMBERSHIP SEC. 202. (a) The Board shall consist of thirteen members appointed by the President by and with the advice and consent of the Senate, one member from each of the twelve small business capital bank districts and one member at large. In making such appointments, the President shall have due regard to a fair representation of the public interest as well as of the particular interest and needs of small business and the special contributions which can be made by small-business concerns to the sound development of the national economy, and shall give particular consideration to persons who are experienced in small business and are familiar with its financing and other problems; and before appointing any member from one of such twelve districts (other than the first member so appointed) the President shall receive and consider any nominations for such appointment which may be submitted by small business investment associations in the district involved. (b) Each member of the Board shall be appointed for a term of fourteen years; except that (1) of the twelve members first appointed from the small business capital bank districts, three shall be appointed for terms of three years, three for terms of seven years, three for terms of ten years, and three for terms of fourteen years, as designated by the President at the time of appointment, and (2) any member appointed to fill a vacancy shall be appointed only for the unexpired portion of his predecessor's term. (c) Each member of the Board shall be a citizen of the United States and (except in the case of the member appointed at large) shall have been a resident of the district from which he is appointed for not less than ten years next preceding his appointment. No person shall be eligible for appointment as a member of the Board if, at the time his term of office would begin or within the one-year period next preceding such time, he shall have been a director or salaried officer or employee of a small business capital bank or small business investment association. The members of the Board shall devote their entire time to the business of the Board and shall not engage in any other occupation or work during their terms of office. (d) The annual rate of basic compensation of each member of the Board shall be $20,000. (e) Each member of the Board, in addition to receiving compensation as provided in subsection (d), shall be reimbused for necessary travel, subsistence, and other expenses actually incurred in the discharge of his duties as such member, without regard to any other laws relating to allowances for such expenses. (f) As soon as practicable after the first members of the Board have been appointed as provided in subsection (a), the members shall meet, subscribe to the oath of office, and organize by electing from among the membership a Chairman and a Vice Chairman and by appointing (from within or without its membership) a Secretary. The Chairman, Vice Chairman, and Secretary shall be elected annually for terms of one year, and shall serve until their respective successors are elected and take office. The Chairman shall preside at all meetings and the Vice Chairman shall preside in the absence or disability of the Chairman. The Board may, in the absence or disability of both the Chairman and Vice Chairman, elect any of its members to act as chairman pro tempore. Seven members shall constitute a quorum of the Board for the transaction of business, and the Board may function notwithstanding vacancies provided a quorum is present. The Board shall meet at such times and places as it may fix and determine, but shall hold at least twelve regularly seheduled meetings a year; and special meetings may be held on call of the Chairman or any three members. 24897-58--2 (g) Notwithstanding subsection (b), any member of the Board may at any time be removed from office for cause by the President or, if cause exists but the President does not act, by the Congress through impeachment proceedings. (h) The Board shall adopt such rules as it may see fit for the transaction of its business, and shall keep permanent and complete records of its acts and proceedings. EXECUTIVE DIRECTOR SEC. 203 (a) The Board shall appoint an Executive Director, who shall serve at the pleasure of the Board and shall, subject to the general supervision and direction of the Board as to matters of a broad and general supervisory, advisory, or policy nature, and, except as otherwise specifically provided in this Act, be responsible for the execution of the functions of the Board. (b) The Board shall fix the compensation of the Executive Director, but his annual rate of basic compensation shall not exceed $17,500. In addition to receiving such compensation, the Executive Director shall be reimbursed for necessary traveling and subsistence expenses, or paid a per diem allowance in lieu thereof within the limitations prescribed by law, while away from his official station upon official business. (c) The Executive Director shall comply with all orders and directors which he receives from the Board; but as to all third persons his acts shall be presumed to be in compliance with the orders and directions of the Board. (d) The Executive Director shall appoint such officers, employees, and other personnel (including attorneys, economists, accountants, experts, assistants, clerks, and laborers) as may be necessary to carry out the functions, powers, and duties vested in the Board, and fix their compensation, in accordance with the civil-service laws and regulations and the Classification Act of 1949. All functions, powers, and duties of the Board, except those specifically reserved to the Board itself by this Act, shall be exercised and performed by the Executive Director and may be exercised and performed by him through such officers, employees, or other personnel of the Board as he may designate. SEAL SEC. 204. The Board shall have an official seal, which shall be judicially noticed. PROVISION OF FUNDS SEC. 205. (a) The funds required for the operating expenses of the Board, and for its investment in the capital stock of the twelve small business capital banks under section 304 (a), shall be obtained as provided in this section. (b) (1) Within ninety days after the enactment of this Act, there shall be transferred to the Board from the existing accounts of the twelve Federal Reserve banks, under the direction of the Board of Governors of the Federal Reserve System, all funds heretofore authorized for loans to industrial and commercial firms under section 13b of the Federal Reserve Act and not loaned or otherwise committed for that purpose, together with all the existing rights and liabilities of the Federal Reserve banks with respect to loans under such section 13b which are outstanding or with respect to which commitments have been issued, including the rights to collect or receive (and to use as provided in subsection (a) of this section) any repayments of such loans which may hereafter become due. Effective ninety days after the date of the enactment of this Act, section 13b of the Federal Reserve Act is repealed; but such repeal shall not affect the power of the Board to carry out, or protect its interest under, any agreement or transaction, theretofore made or entered into under such section, with respect to which rights and liabilities are transferred to the Board under this paragraph. (2) Within ninety days after the date of the enactment of this Act, there shall be transferred to the Board from the existing surplus accounts of the twelve Federal Reserve banks, under the direction of the Board of Governors of the Federal Reserve System, the sum of $120,000,000. The amount which shall be transferred from the surplus account of any Federal Reserve bank under this subsection shall bear the same ratio to $120,000,000 as the surplus account of that bank bears (on the date of the enactment of this Act) to the total of the surplus accounts of all twelve Federal Reserve banks. (c) Whenever the Board's investment in the capital stock of any small business capital bank is retired as provided in section 304 (b), the proceeds from the |