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George W. Bush Presidential Library
Collection: Executive Clerk, Office of the
Series: Saunders, G. Timothy (Tim) - Bill Files
Folder Title: 12/21/2001 [S. 1196]
Withdrawn/Redacted Material
The George W. Bush Library
DOCUMENT FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
NO.
001
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
002
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
003
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
004
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
005
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
006
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
COLLECTION TITLE:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
Page 1 of 2
This document was prepared on Wednesday, June 05, 2013
Withdrawn/Redacted Material
The George W. Bush Library
DOCUMENT FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
NO.
007
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
008
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
009
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
010
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001 P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
011
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
012
Letter
[Views of the US Small Business Administration] - To:
2
12/14/2001
P5;
Mitchell E. Daniels, Jr. - From: Hector V. Barreto
COLLECTION TITLE:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
Page 2 of 2
This document was prepared on Wednesday, June 05, 2013
F41
499949
'010EC 19 PM11:03
OFFICE PRESIDENT STATES UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
MEDanies/ Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFFICE OF THE OF MANAGEM PRESIDENT STATES UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
01 DEC 19 PRI0:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
MEDanies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
PRESIDENT OF THE OF THE OF OFFECE OFFICE UNITED OF STATE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
'01 DEC 19PM10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
-- Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
MEDanies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
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2
12/14/2001
P5;
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For a complete list of items withdrawn from this folder, see the
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12/21/2001 [S. 1196]
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499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT N/C
HUBBARD agree
CARD ok
HUGHES
>
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
oh
CALIO
f
LINDSEY oh
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES N/C
SPELLINGS ok
HAGIN
CLERK
HAWKINS
R
SB N/C
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
Memo to the Record
Date: 07/11/2016
Collection: Executive Clerk, Office of the Saunders, G. Timothy (Tim)
Series: Bill Flies
Folder Title: 12/21/2001 [S. 1196]
RE: SMALL BUSINESS INVESTMENT COMPANY AMENDMENTS ACT OF 2001
A copy of the report entitled "SMALL BUSINESS INVESTMENT COMPANY
AMENDMENTS ACT OF 2001" is included at this location in this folder. It was not scanned. It
can be viewed at https://www.congress.gov/107/crpt/srpt55/CRPT-107srp155.pdf If this link is
broken, please contact the George W. Bush Presidential Library archives.
S. 1196
One Hundred Seventh Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, two thousand and one
An Act
To amend the Small Business Investment Act of 1958, and for other purposes.
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 Investment
Company Amendments Act of 2001".
SEC. 2. SUBSIDY FEES.
(a) IN GENERAL-Section 303 of the Small Business Investment
Act of 1958 (15 U.S.C. 683) is amended-
(1) in subsection (b)-
(A) by striking "of not more than 1 percent per year";
(B) by inserting "which amount may not exceed 1.38
percent per year, and" before "which shall be paid"; and
(C) by striking "September 30, 2000" and inserting
"September 30, 2001"; and
(2) in subsection (g)(2)-
(A) by striking "of not more than 1 percent per year";
(B) by inserting "which amount may not exceed 1.38
percent per year, and" before "which shall be paid"; and
(C) by striking "September 30, 2000" and inserting
"September 30, 2001".
(b) EFFECTIVE DATE.-The amendments made by this section
shall become effective on October 1, 2001.
SEC. 3. CONFLICTS OF INTEREST.
Section 312 of the Small Business Investment Act of 1958
(15 U.S.C. 687d) is amended by striking "(including disclosure in
the locality most directly affected by the transaction)".
SEC. 4. PENALTIES FOR FALSE STATEMENTS.
(a) CRIMINAL PENALTIES.-Section 1014 of title 18, United
States Code, is amended by inserting ", as defined in section 103
of the Small Business Investment Act of 1958 (15 U.S.C. 662),
or the Small Business Administration in connection with any provi-
sion of that Act" after "small business investment company".
(b) CIVIL PENALTIES.-Section 951 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833a)
is amended-
(1) by redesignating subsections (d) through (g) as sub-
sections (e) through (h), respectively; and
(2) in subsection (c)-
(A) in paragraph (1), by striking "or" at the end;
S. 1196-2
(B) in paragraph (2)-
(i) by striking "1341;" and inserting "1341"; and
(ii)-by striking "institution." and inserting "institu-
tion; or";
(C) by inserting immediately after paragraph (2) the
following:
"(3) section 16(a) of the Small Business Act (15 U.S.C.
645(a))."; and
(D) by striking "This section shall" and inserting the
following:
"(d) EFFECTIVE DATE.-This section shall".
SEC. 5. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.
Section 313 of the Small Business Investment Act of 1958
(15 U.S.C. 687e) is amended to read as follows:
"SEC. 313. REMOVAL OR SUSPENSION OF MANAGEMENT OFFICIALS.
"(a) DEFINITION OF 'MANAGEMENT OFFICIAL'.-In this section,
the term management official' means an officer, director, general
partner, manager, employee, agent, or other participant in the
management or conduct of the affairs of a licensee.
"(b) REMOVAL OF MANAGEMENT OFFICIALS.-
"(1) NOTICE OF REMOVAL.-The Administrator may serve
upon any management official a written notice of its intention
to remove that management official whenever, in the opinion
of the Administrator-
"(A) such management official-
"(i) has willfully and knowingly committed any
substantial violation of-
"(I) this Act;
"(II) any regulation issued under this Act; or
"(III) a cease-and-desist order which has
become final; or
"(ii) has willfully and knowingly committed or
engaged in any act, omission, or practice which con-
stitutes a substantial breach of a fiduciary duty of
that person as a management official; and
"(B) the violation or breach of fiduciary duty is one
involving personal dishonesty on the part of such manage-
ment official.
"(2) CONTENTS OF NOTICE.-A notice of intention to remove
a management official, as provided in paragraph (1), shall
contain a statement of the facts constituting grounds therefor,
and shall fix a time and place at which a hearing will be
held thereon.
"(3) HEARINGS.-
"(A) TIMING.-A hearing described in paragraph (2)
shall be fixed for a date not earlier than 30 days nor
later than 60 days after the date of service of notice of
the hearing, unless an earlier or a later date is set by
the Administrator at the request of-
"(i) the management official, and for good cause
shown; or
"(ii) the Attorney General of the United States.
"(B) CONSENT.-Unless the management official shall
appear at a hearing described in this paragraph in person
or by a duly authorized representative, that management
S. 1196-3
official shall be deemed to have consented to the issuance
of an order of removal under paragraph (1).
"(4) ISSUANCE OF ORDER OF REMOVAL.-
"(A) IN GENERAL.In the event of consent under para-
graph (3)(B), or if upon the record made at a hearing
described in this subsection, the Administrator finds that
any of the grounds specified in the notice of removal has
been established, the Administrator may issue such orders
of removal from office as the Administrator deems appro-
priate.
"(B) EFFECTIVENESS.-An order under subparagraph
(A) shall-
"(i) become effective at the expiration of 30 days
after the date of service upon the subject licensee and
the management official concerned (except in the case
of an order issued upon consent as described in para-
graph (3)(B), which shall become effective at the time
specified in such order); and
"(ii) remain effective and enforceable, except to
such extent as it is stayed, modified, terminated, or
set aside by action of the Administrator or a reviewing
court in accordance with this section.
"(c) AUTHORITY TO SUSPEND OR PROHIBIT PARTICIPATION.-
"(1) IN GENERAL.-The Administrator may, if the Adminis-
trator deems it necessary for the protection of the licensee
or the interests of the Administration, suspend from office
or prohibit from further participation in any manner in the
management or conduct of the affairs of the licensee, or both,
any management official referred to in subsection (b)(1), by
written notice to such effect served upon the management
official.
"(2) EFFECTIVENESS.-A suspension or prohibition under
paragraph (1)-
"(A) shall become effective upon service of notice under
paragraph (1); and
"(B) unless stayed by a court in proceedings authorized
by paragraph (3), shall remain in effect-
"(i) pending the completion of the administrative
proceedings pursuant to a notice of intention to remove
served under subsection (b); and
"(ii) until such time as the Administrator shall
dismiss the charges specified in the notice, or, if an
order of removal or prohibition is issued against the
management official, until the effective date of any
such order.
"(3) JUDICIAL REVIEW.-Not later than 10 days after any
management official has been suspended from office or prohib-
ited from participation in the management or conduct of the
affairs of a licensee, or both, under paragraph (1), that manage-
ment official may apply to the United States district court
for the judicial district in which the home office of the licensee
is located, or the United States District Court for the District
of Columbia, for a stay of the suspension or prohibition pending
the completion of the administrative proceedings pursuant to
a notice of intent to remove served upon the management
official under subsection (b), and such court shall have jurisdic-
tion to stay such action.
S. 1196-4
"(d) AUTHORITY To SUSPEND ON CRIMINAL CHARGES.-
"(1) IN GENERAL-Whenever a management official is
charged in any information, indictment, or complaint
authorized by a United States attorney, with the commis-
sion of or participation in a felony involving dishonesty
or breach of trust, the Administrator may, by written notice
served upon that management official, suspend that
management official from office or prohibit that manage-
ment official from further participation in any manner
in the management or conduct of the affairs of the licensee,
or both.
"(2) EFFECTIVENESS.-A suspension or prohibition
under paragraph (1) shall remain in effect until the subject
information, indictment, or complaint is finally disposed
of, or until terminated by the Administrator.
"(3) AUTHORITY UPON CONVICTION.-If a judgment of
conviction with respect to an offense described in paragraph
(1) is entered against a management official, then at such
time as the judgment is not subject to further appellate
review, the Administrator may issue and serve upon the
management official an order removing that management
official, which removal shall become effective upon service
of a copy of the order upon the licensee.
"(4) AUTHORITY UPON DISMISSAL OR OTHER DISPOSI-
TION.-A finding of not guilty or other disposition of charges
described in paragraph (1) shall not preclude the Adminis-
trator from thereafter instituting proceedings to suspend
or remove the management official from office, or to pro-
hibit the management official from participation in the
management or conduct of the affairs of the licensee, or
both, pursuant to subsection (b) or (c).
"(e) NOTIFICATION TO LICENSEES.-Copies of each notice
required to be served on a management official under this section
shall also be served upon the interested licensee.
"(f) PROCEDURAL PROVISIONS; JUDICIAL REVIEW.-
"(1) HEARING VENUE.-Any hearing provided for in this
section shall be-
"(A) held in the Federal judicial district or in the
territory in which the principal office of the licensee is
located, unless the party afforded the hearing consents
to another place; and
"(B) conducted in accordance with the provisions of
chapter 5 of title 5, United States Code.
"(2) ISSUANCE OF ORDERS.-After a hearing provided for
in this section, and not later than 90 days after the Adminis-
trator has notified the parties that the case has been submitted
for final decision, the Administrator shall render a decision
in the matter (which shall include findings of fact upon which
its decision is predicated), and shall issue and cause to be
served upon each party to the proceeding an order or orders
consistent with the provisions of this section.
"(3) AUTHORITY TO MODIFY ORDERS.-The Administrator
may modify, terminate, or set aside any order issued under
this section-
"(A) at any time, upon such notice, and in such manner
as the Administrator deems proper, unless a petition for
review is timely filed in a court of appeals of the United
S. 1196-5
States, as provided in paragraph (4)(B), and thereafter
until the record in the proceeding has been filed in accord-
ance with paragraph (4)(C); and
"(B) upon such filing of the record, with permission
of the court.
"(4) JUDICIAL REVIEW.-
"(A) IN GENERAL-Judicial review of an order issued
under this section shall be exclusively as provided in this
subsection.
"(B) PETITION FOR REVIEW.-Any party to a hearing
provided for in this section may obtain a review of any
order issued pursuant to paragraph (2) (other than an
order issued with the consent of the management official
concerned, or an order issued under subsection (d)), by
filing in the court of appeals of the United States for
the circuit in which the principal office of the licensee
is located, or in the United States Court of Appeals for
the District of Columbia Circuit, not later than 30 days
after the date of service of such order, a written petition
praying that the order of the Administrator be modified,
terminated, or set aside.
"(C) NOTIFICATION TO ADMINISTRATION.-A copy of a
petition filed under subparagraph (B) shall be forthwith
transmitted by the clerk of the court to the Administrator,
and thereupon the Administrator shall file in the court
the record in the proceeding, as provided in section 2112
of title 28, United States Code.
"(D) COURT JURISDICTION.-Upon the filing of a petition
under subparagraph (A)-
"(i) the court shall have jurisdiction, which, upon
the filing of the record under subparagraph (C), shall
be exclusive, to affirm, modify, terminate, or set aside,
in whole or in part, the order of the Administrator,
except as provided in the last sentence of paragraph
(3)(B);
"(ii) review of such proceedings shall be had as
provided in chapter 7 of title 5, United States Code;
and
"(iii) the judgment and decree of the court shall
be final, except that the judgment and decree shall
be subject to review by the Supreme Court of the
United States upon certiorari, as provided in section
1254 of title 28, United States Code.
"(E) JUDICIAL REVIEW NOT A STAY.-The commence-
ment of proceedings for judicial review under this para-
graph shall not, unless specifically ordered by the court,
operate as a stay of any order issued by the Administrator
under this section.".
SEC. 6. REDUCTION OF FEES.
(a) Two-YEAR REDUCTION OF SECTION 7(a) FEES.-
(1) GUARANTEE FEES.-Section 7(a)(18) of the Small Busi-
ness Act (15 U.S.C. 636(a)(18)) is amended by adding at the
end the following:
S. 1196-6
"(C) TWO-YEAR REDUCTION IN FEES.-With respect to
loans approved during the 2-year period beginning on
October 1, 2002, the guarantee fee under subparagraph
(A) shall be as follows:
"(i) A guarantee fee equal to 1 percent of the
deferred participation share of a total loan amount
that is not more than $150,000.
"(ii) A guarantee fee equal to 2.5 percent of the
deferred participation share of a total loan amount
that is more than $150,000, but not more than
$700,000.
"(iii) A guarantee fee equal to 3.5 percent of the
deferred participation share of a total loan amount
that is more than $700,000."
(2) ANNUAL FEES.-Section 7(a)(23)(A) of the Small Busi-
ness Act (15 U.S.C. 636(a)(23)(A)) is amended by adding at
the end the following: "With respect to loans approved during
the 2-year period beginning on October 1, 2002, the annual
fee assessed and collected under the preceding sentence shall
be in an amount equal to 0.25 percent of the outstanding
balance of the deferred participation share of the loan.'
(b) REDUCTION OF SECTION 504 FEES.-Section 503 of the Small
Business Investment Act of 1958 (15 U.S.C. 697) is amended—
(1) in subsection (b)(7)(A)-
(A) by redesignating clauses (i) and (ii) as subclauses
(I) and (II), respectively, and moving the margins 2 ems
to the right;
(B) by striking "not exceed the lesser" and inserting
"not exceed-
"(i) the lesser"; and
(C) by adding at the end the following:
"(ii) 50 percent of the amount established under
clause (i) in the case of a loan made during the 2-
year period beginning on October 1, 2002, for the life
of the loan; and"; and
(2) by adding at the end the following:
"(i) Two-YEAR WAIVER OF FEES.-The Administration may not
assess or collect any up front guarantee fee with respect to loans
made under this title during the 2-year period beginning on October
1, 2002."
(c) BUDGETARY TREATMENT OF LOANS AND FINANCINGS.-Assist-
ance made available under any loan made or approved by the
Small Business Administration under section 7(a) of the Small
Business Act (15 U.S.C. 636(a)) or financings made under title
V of the Small Business Investment Act of 1958 (15 U.S.C. 695
et seq.), during the 2-year period beginning on October 1, 2002,
shall be treated as separate programs of the Small Business
Administration for purposes of the Federal Credit Reform Act of
1990 only.
S. 1196-7
(d) USE OF FUNDS.-The amendments made by this section
to section 503 of the Small Business Investment Act of 1958, shall
be effective only to the extent that funds are made available under
appropriations Acts, which funds shall be utilized by the Adminis-
trator to offset the cost (as such term is defined in section 502
of the Federal Credit Reform Act of 1990) of such amendments.
(e) EFFECTIVE DATE.-The amendments made by this section
shall become effective on October 1, 2002.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
OFFICE OF THE PRESIDENT SIATES UNITED
EXECUTIVE OFFICE OF THE PRESIDENT
01 DEC 19 PRI1:03
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
STATES DECUTIVE UNITED THE OFFICE OF THE PRESIDENT
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
'01 DEC 19 PM1:03
WASHINGTON, D.C. 20503
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
499949
OFFICE THE PRESIDENT UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
THE DIRECTOR
010EC19 PM10:55
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
MEDanies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
SS/ RM NO.
499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFFICE OF THE MANAGEN PRESIDENT STATES AND UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
OIDEC 19 PM10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
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FORM
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DATE
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[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
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COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
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732
NARA Num.:
1458
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b(1) National security classified information [(b)(1) of the FOIA]
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P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
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b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
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personal privacy [(b)(6) of the FOIA]
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PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
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This Document was withdrawn on 6/5/2013
by TDF
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFICE THE PRESIDENT UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
01 DEC 19 PR10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments). and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
-- Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
MEDanies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
12/20/01 THU 01:15 FAX
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CONNECTION ID
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SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL.. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY. 12-20-01. THANK YOU.
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFFICE OF THE OF MANAGEM PRESIDENT STATES UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
01 0EC 19 PR10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
McDoniel
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
001
12/20/01 THU 01:09 FAX
*** TX REPORT ***
TRANSMISSION OK
TX/RX NO
1293
CONNECTION TEL
56958
CONNECTION ID
ST. TIME
12/20 01:06
USAGE T
02'43
PGS. SENT
6
RESULT
OK
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY 12-20-01 THANK YOU
SS/ RM NO.
499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFFICE OF THE OF PRESIDENT UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
01 DEC 19 PRI0:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any. "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
McDonies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
12/20/01 THU 01:12 FAX
001
*** TX REPORT ***
TRANSMISSION OK
TX/RX NO
1294
CONNECTION TEL
51005
CONNECTION ID
ST. TIME
12/20 01:09
USAGE T
02'41
PGS. SENT
6
RESULT
OK
SS/ RM NO.
499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION
FYI
ACTION
FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY. 12-20-01. THANK YOU,
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFFICE OF THE PRESIDENT UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
01 DEC 19 PM10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes, an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
0102020 AM6:58
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
6:00Pm
ge AHe
the
als
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
AMERICA OFFICE OF THE PRESIDENT UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
01 DEC 19 PRI0:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
McDonies/ Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196|
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM Noel
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
'01 0FC 20 AM10:31 20
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE: No comments. ugF
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFFICE OF THE PRESIDENT UNITED THE
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
McDonies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
'01 DEC 20 AM10:42
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
of
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFFICE OF THE OF PRESIDENT UNITED
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF AND BUDGET
WASHINGTON, D.C. 20503
01 DEC 19 PR10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
McDonies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
01 DEC 20 PM2:44
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
ligalation sffin (Howel) ok
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
OFICE OF THE THE PRESIDENT STATES OF THE UNITED
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
'01 DEC 19 PM10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privatelyrowned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
McDonies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P1 National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advise between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
b(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
2201(3).
financial institutions [(b)(8) of the FOIA]
b(9) Release would disclose geological or geophysical information
Deed of Gift Restrictions
concerning wells [(b)(9) of the FOIA]
A. Closed by Executive Order 13526 governing access to national
security information.
B. Closed by statute or by the agency which originated the document.
C. Closed in accordance with restrictions contained in donor's deed
of gift.
This Document was withdrawn on 6/5/2013
by TDF
DEC-20-2001 14:38
EOP-CEA
202 395 6958
P.01/01
SS/ RM NO. 499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958
01 DEC 20 PM3:00
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
RESPONSE:
CEA recommends approval.
pr/wally Mullin
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
TOTAL P.01
SB
SS/ RM NO.
499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958,
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
N/C
12.20 Sus
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
AMERICAN OFFICE OF THE PRESIDENT OF THE UNITED
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
DEC 19 PM10:55
THE DIRECTOR
December 19, 2001
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Enrolled Bill S. 1196 - Small Business Investment Company Amendments Act of
2001
Sponsors - Sen. Bond (R) Missouri and Sen. Kerry (D) Massachusetts
Last Day for Action
December 26, 2001 - Wednesday
Purpose
(1) Authorizes an increase in certain Small Business Administration (SBA) fees for
guaranteeing debentures and participating securities sold by Small Business Investment
Companies (SBICs); (2) mandates a two-year reduction in fees for certain SBA-guaranteed loans
to small businesses; and (3) makes miscellaneous amendments to the Small Business Investment
Act.
Agency Recommendations
Office of Management and Budget
Approval
Small Business Administration (SBA)
Approval
Department of Justice
No objection (Informally)
Department of Commerce
No comment (Informally)
Department of the Treasury
No comment (Informally)
Discussion
-- Increased Guarantee Fee Limits for Debentures and Participating Securities
SBICs are privately owned investment firms that invest venture capital in small
businesses and are licensed and regulated by SBA. SBICs obtain loan and investment capital
primarily through the sale of debentures (bonds and other debt instruments) and participating
securities (stock, limited partnerships, and other ownership instruments). SBICs sell guaranteed
debentures and participating securities to the public through SBA. SBA sells "trust certificates"
to the public, which are backed by an ownership interest in the SBIC's debentures and
participating securities. The maximum values of participating securities and debentures that
SBA may guarantee are specified in authorization and appropriation acts. SBA is also required
under the Federal Credit Reform Act of 1990, as amended, to cover, through appropriations or
the collection of fees, the projected "subsidy costs" (the estimated long-term costs to the
Government) of the debentures and participating securities guaranteed in any fiscal year.
S. 1196 would increase borrower's guarantee fees in the SBIC Participating Securities
program from 1 percent to 1.38 percent. This fee increase was proposed in the FY 2002 Budget,
and eliminates the need for appropriations to cover the firm's subsidy cost. Because the current
fee is inadequate to support the anticipated demand for guarantees, SBA has not entered into any
new guarantees since the beginning of the current fiscal year. SBA advises that the fee increase
is needed "in order to continue program operations."
-- Mandatory Two-Year Reductions in Fees
Section 7(a) guaranteed loans. SBA guarantees loans to small businesses for general
business purposes under section 7(a) of the Small Business Act. Under this program, SBA
guarantees up to 85 percent of loans for amounts of $150,000 or less and up to 75 percent of
loans for amounts greater than $150,000. "Section 7(a) loans" are provided by private lenders
certified to participate in the program.
SBA currently charges the section 7(a) borrower an "up front fee" equal to 2 percent of
the guaranteed portion of loans of $150,000 or less (lenders may retain 0.5 percent of the fees on
such loans); 3 percent of the guaranteed portion of loans greater than $150,000 and less than or
equal to $700,000; and 3.5 percent of the guaranteed portion of loans greater than $700,000. In
addition, all section 7(a) loans are subject to an annual servicing fee equal to 0.5 percent of the
outstanding balance of the guaranteed portion of the loan.
S. 1196 would require SBA to reduce the annual servicing fee for section 7(a) loans from
0.50 percent to 0.25 percent during FYs 2003 and 2004. During the same period, SBA would be
required to reduce up front fees to 1 percent for loans of $150,000 or less and 2 percent for loans
greater than $150,000 and less than or equal to $700,000. Fees for loans over $700,000 would
continue to be 3.5 percent. In its enrolled bill views letter, SBA states that "[t]he fee reductions
on 7(a) will significantly increase the cost of the program and will necessitate either additional
appropriations or a reduction of the program level."
Section 504 guaranteed loans. SBA guarantees loans to small businesses to help them
acquire major fixed assets such as land or buildings under Section 504 of the Small Business Act.
"Section 504 loans" combine loans from private lenders covering up to 50 percent of project
costs, contributions of at least 10 percent equity from borrowers, and loans from Certified
Development Companies (CDCs) covering up to 40 percent of the cost. (CDCs are nonprofit
corporations established to provide financing to small businesses.) SBA guarantees 100 percent
of the portion of the loans made by CDCs, and charges an up front fee approximating 3 percent
of the amount guaranteed.
-2-
S. 1196 would reduce annual fees for section 504 loans by 50 percent during FYs 2003
and 2004. (Under current law, SBA is required to charge borrowers an annual fee equal to the
lesser of: (1) 0.9375 percent of the outstanding principal balance; or (2) the minimum percentage
necessary to cover the subsidy cost of the program.) The enrolled bill would also prohibit SBA
from charging any "up front guarantee fee" for section 504 loans made during FYs 2003 and
2004. However, these fee reductions would become effective only to the extent that sufficient
funds are appropriated to cover the program's subsidy cost. In its enrolled bill views letter, SBA
notes that the section 504 program has been operating for several years without the need for
appropriations.
Calculation of subsidy costs during FYs 2003 and 2004. S. 1196 would specify that
during FYs 2003 and 2004, the section 7(a) and section 504 programs "shall be treated as
separate programs of the [SBA] for purposes of the Federal Credit Reform Act of 1990 only."
This would require that subsidy costs be calculated separately for the two programs.
-- Other Amendments to the Small Business Investment Act
The enrolled bill includes three Administration proposals that would:
--
Eliminate an anomaly under which a false statement designed to influence an
SBIC's action under the Small Business Investment Act is a criminal offense, but a
false statement designed to influence SBA's actions under the same Act is not. The
bill would make such false statements to either SBA or SBICs subject to the same
criminal and civil penalties.
--
Modify a provision which limits SBA to removing or suspending "directors or
officers" of an SBIC so that SBA could in appropriate circumstances remove or
suspend any "management officials" of the SBIC, including officers, directors,
managers, general partners, employees, agents, "or other participant[s] in the
conduct of the affairs" of an SBIC. It would also amend provisions specifying the
procedures which must be followed in such suspensions or removals.
--
Eliminate a requirement that SBA advertise the existence of conflict of interest
investigations of SBICs in local media. SBA has stated that it has never received a
response to such an advertisement.
Conclusion and Recommendations
We join SBA in recommending approval of S. 1196, which passed the House by voice
vote and the Senate by unanimous consent.
McDonies/
Mitchell E. Daniels, Jr.
Director
Enclosures
-3-
Withdrawal Marker
The George W. Bush Library
FORM
SUBJECT/TITLE
PAGES
DATE
RESTRICTION(S)
Letter
[Views of the US Small Business Administration] - To: Mitchell E.
2
12/14/2001
P5;
Daniels, Jr. - From: Hector V. Barreto
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from this folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Executive Clerk, Office Of the
SERIES:
Saunders, G. Timothy (Tim) - Bill Files
FOLDER TITLE:
12/21/2001 [S. 1196]
FRC ID:
781
OA Num.:
732
NARA Num.:
1458
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b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office [(a)(2) of the PRA]
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute [(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
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financial information [(a)(4) of the PRA]
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information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
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purposes [(b)(7) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(8) Release would disclose information concerning the regulation of
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This Document was withdrawn on 6/5/2013
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DEC-20-2001 17:26
OVP
2024560387
P.01
OFFICE OF THE VICE PRESIDENT
WASHINGTON
01 DEC 20 PM5:43
December 20, 2001
MEMORANDUM FOR HARRIET MIERS
STAFF SECRETARY
FROM:
JONATHAN BURKS
DEPUTY STAFF SECRETARY TO THE VICE PRESIDENT
SUBJECT:
S. 1196, an Act to Amend the Small Business
Investment Act of 1958, and for Other Purposes
The Office of the Vice President has reviewed the above-referenced
draft and has no comments.
12/20/01 17:59 FAX
NATL ECONOMIC COUNCIL
5.
001
SS/ RM NO.
499949
WHITE HOUSE STAFFING MEMORANDUM
Date: 12-19-01
ACTION / CONCURRENCE / COMMENT DUE BY: 12-20-01, 6:00 pm
S. 1196, AN ACT TO AMEND THE SMALL BUSINESS INVESTMENT ACT OF 1958: PMB 12
Subject: AND FOR OTHER PURPOSES
ACTION FYI
ACTION FYI
VICE PRESIDENT
HUBBARD
CARD
HUGHES
BLAKEMAN
IRASTORZA
BOLTEN
JOHNSON
CALIO
LINDSEY
CONNAUGHTON
MIERS
DANIELS
RICE
FLEISCHER
RIDGE
GERSON
ROVE
GONZALES
SPELLINGS
HAGIN
CLERK
HAWKINS
REMARKS:
PLEASE SEND COMMENTS TO STAFF SECRETARY, TEL. 62702 OR FAX 62215, NO LATER
THAN 6:00 PM THURSDAY, 12-20-01. THANK YOU.
OK-NEC/
RESPONSE:
Harriet E. Miers
Assistant to the President
and Staff Secretary
Ext. 62702
S.1196
One Hundred Sebenth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, two thousand and one
DEC 2001
THE HOUSE WHITE
An Act
To amend the Small Business Investment Act of 1958, and for other purposes.
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 Investment
Company Amendments Act of 2001".
SEC. 2. SUBSIDY FEES.
(a) IN GENERAL.-Section 303 of the Small Business Investment
Act of 1958 (15 U.S.C. 683) is amended—
(1) in subsection (b)—
(A) by striking "of not more than 1 percent per year";
(B) by inserting "which amount may not exceed 1.38
percent per year, and" before "which shall be paid"; and
(C) by striking "September 30, 2000" and. inserting
"September 30, 2001"; and
(2) in subsection (g)(2)-
(A) by striking "of not more than 1 percent per year";
(B) by inserting "which amount may not exceed 1.38
percent per year, and" before "which shall be paid"; and
(C) by striking "September 30, 2000" and inserting
"September 30, 2001".
(b) EFFECTIVE DATE.-The amendments made by this section
shall become effective on October 1, 2001.
SEC. 3. CONFLICTS OF INTEREST.
Section 312 of the Small Business Investment Act of 1958
(15 U.S.C. 687d) is amended by striking "(including disclosure in
the locality most directly affected by the transaction)".
SEC. 4. PENALTIES FOR FALSE STATEMENTS.
(a) CRIMINAL PENALTIES.-Section 1014 of title 18, United
States Code, is amended by inserting ", as defined in section 103
of the Small Business Investment Act of 1958 (15 U.S.C. 662),
or the Small Business Administration in connection with any provi-
sion of that Act" after "small business investment company".
(b) CIVIL PENALTIES.-Section 951 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1833a)
is amended-
(1) by redesignating subsections (d) through (g) as sub-
sections (e) through (h), respectively; and
(2) in subsection (c)—
(A) in paragraph (1), by striking "or" at the end;
S. 1196-7
(d) USE OF FUNDS.-The amendments made by this section
to section 503 of the Small Business Investment Act of 1958, shall
be effective only to the extent that funds are made available under
appropriations Acts, which funds shall be utilized by the Adminis-
trator to offset the cost (as such term is defined in section 502
of the Federal Credit Reform Act of 1990) of such amendments.
(e) EFFECTIVE DATE.-The amendments made by this section
shall become effective on October 1, 2002.
Speaker
of
the
House
of
Representatives.
Vige President of the President United States of the and Senate Aro
Tempore.
APPROVED
DEC 2 1. 2001
Eye 3e