article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Economic Growth and Stabilization Financing Demonstration Act 1994''. SEC. 101. GUARANTEED LOAN DEMONSTRATION PROGRAM. (a) In General.--In order to study the feasibility and desirability of a program of loan guarantees for economic growth and stabilization in communities facing economic distress, the Secretary is authorized to guarantee loans made to private borrowers by private lending institutions, community development financial institutions, and other lenders as the Secretary considers appropriate, except that the Secretary may guarantee loans less than $750,000 only if the borrower is not eligible for a loan guarantee under the Small Business Act. (b) Terms and Conditions.-- (1) In general.--The Secretary may make such guarantees upon application of the lenders and upon such terms and conditions as the Secretary may prescribe. (2) Presumption of validity.--Guarantees under paragraph (1) shall be conclusive evidence that the guarantee has been properly obtained, that the underlying loan qualifies for such guarantee, and that, but for fraud or material misrepresentation by the holder, such guarantee will be presumed to be valid, legal, and enforceable. (3) Lender responsibility.--No guarantee will be provided unless the lender is responsible and makes adequate provision for servicing the loan on reasonable terms and for protecting the financial interest of the United States. (c) Preferred Lender Preference.--To the extent feasible, the Secretary shall exercise the guarantee authority established under this section on a preferred lender basis and authorize lenders, in accordance with agreements entered into between the Secretary and such lenders, to take such actions on the Secretary's behalf as the Secretary deems appropriate, including, but not limited to, the determination of eligibility and credit worthiness and loan monitoring, collection and liquidation. (d) Target Subsidy Rate.--In exercising the loan guarantee authority provided under this section, the Secretary shall attempt to administer the program in a manner which results in a subsidy rate not to exceed approximately 6 percent of the amount of the overall loan guarantees. (e) Authorization of Appropriations.--Of the funds authorized to be appropriated under section 106, for purposes of this section there are authorized to be appropriated $50,000,000 per fiscal year to cover the costs (as defined in section 502(5) of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5))) of loan guarantees issued pursuant to subsection (b)(3) of such section. Such sums shall remain available until expended. SEC. 102. INTEREST RATE SUBSIDY DEMONSTRATION PROGRAM. (a) In General.--In order to study the feasibility and desirability of a program of interest rate subsidies for economic growth and stabilization in communities facing economic distress, the Secretary is authorized to pay interest rate subsidies to private lending institutions, community development financial institutions, and other lenders as the Secretary considers appropriate, for loans made to private borrowers. (b) Terms and Conditions.--The Secretary may pay interest rate subsidies upon application of the lenders and upon such terms and conditions as the Secretary may prescribe, except that no interest rate subsidy may be provided unless the lender is responsible and makes adequate provision for servicing the loan on reasonable terms and for protecting the financial interest of the United States. (c) Preferred Lender Preference.--To the extent feasible, the Secretary shall exercise the interest rate subsidy authority established under this section on a preferred lender basis and authorize lenders, in accordance with agreements entered into between the Secretary and such lenders, to take such actions on the Secretary's behalf as the Secretary deems appropriate, including, but not limited to, the determination of eligibility and credit worthiness and loan monitoring, collection and liquidation. SEC. 103. EQUITY FINANCE DEMONSTRATION PROGRAM. (a) In General.--In order to study the feasibility and desirability of a program of equity financing for economic growth and stabilization in communities facing economic distress, the Secretary is authorized to establish a demonstration program under which the Secretary may directly, or indirectly through grants to eligible intermediaries, purchase or commit to purchase warrants, subordinated debt, or nonvoting preferred securities of private United States businesses or nonprofit organizations and associations. (b) Establishment of Fund.--For purposes of conducting the program provided under subsection (a), the Secretary shall establish an Equity Investment Revolving Fund. (c) Disposal of Equity Instruments.--The Secretary shall endeavor to dispose of any financial instruments purchased or guaranteed under this section within a period of 10 years after their date acquisition of such interest. (d) Use of Payments.-- (1) Use of payments to the secretary.--Amounts received by the Secretary from the payment of dividends and the redemption of financial instruments acquired under this section shall be deposited in the Equity Investment Revolving Fund and shall, subject to appropriations, be available to make or guarantee additional investments consistent with this section. (2) Use of payments to eligible intermediaries.--Of the amounts received by eligible recipient intermediaries from the payment of dividends and the redemption of financial instruments acquired under this section-- (A) up to 50 percent may be retained by such eligible intermediaries to make or guarantee additional investments consistent with this section, and (B) no less than 50 percent shall be returned to the Secretary to be deposited into the Fund established under subsection (b) to make or guarantee additional investments consistent with this section. (e) Investment of Excess Funds.--If the Secretary determines that the amount of money in the Fund exceeds the current requirements of the Fund, the Secretary may direct the Secretary of the Treasury to invest such amounts in obligations of the United States, in obligations guaranteed by the United States Government, or in such other obligations or securities of the United States as the Secretary of the Treasury deems appropriate. Provided, however, that any subsequent use of monies so invested shall be subject to appropriations. SEC. 104. SECONDARY MARKET CREDIT ENHANCEMENT DEMONSTRATION PROGRAM. In order to study the feasibility and desirability of a program of providing credit enhancements to pools of financial instruments related to economic growth and stabilization activities in communities facing economic distress, the Secretary is authorized to establish a demonstration program under which the Secretary may provide credit enhancements to pools of financial instruments related to economic growth and stabilization activities in such areas. SEC. 105. PERFORMANCE EVALUATIONS; REPORT TO CONGRESS. (a) Performance Evaluations.--The Secretary shall conduct performance evaluations of each of the demonstration projects established under this Act to assess their effectiveness in promoting economic growth and stabilization in communities facing economic distress. (b) Annual Report.--Based on the evaluations conducted under subsection (a), the Secretary shall prepare and submit annually a report to the Congress containing a full and detailed account of operations under this Act. Such a report shall include-- (1) performance measures established under subsection (a); (2) an audit setting forth the amount, type, recipient, and source of disbursements, receipts, and losses sustained as a result of operations under this Act during the preceding fiscal year and since inception of the demonstration programs; and (3) recommendations with respect to program changes, statutory changes, and other matters to improve and facilitate the operations of the demonstration programs and to encourage the use of these programs by qualified concerns. SEC. 106. AUTHORIZATION OF APPROPRIATIONS. For purposes of this Act, there are authorized to be appropriated $90,000,000 per fiscal year. Such sums shall remain available until expended. SEC. 107. SEPARABILITY. If any provision of this Act, or any application of such provision to any person or circumstance, shall be held invalid, the remainder of this Act, or the application of such provision to person or circumstance other than those as to which it is held invalid, shall not be affected thereby.
summary: Economic Growth and Stabilization Financing Demonstration Act 1994 - Prescribes guidelines under which the Secretary of Commerce may conduct demonstration programs in economically distressed communities to: (1) guarantee loans made by lending institutions to private parties; (2) pay interest rate subsidies; (3) implement an equity financing program; and (4) provide secondary market credit enhancements to pools of financial instruments related to economic growth and stabilization in such communities. Directs the Secretary to conduct performance evaluations and submit an annual status report to the Congress. Authorizes appropriations.