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ganized under this Act shall, with the approval of the Board of Governors, sell to such member bank all or a portion of such shares up to the amount which such member bank is authorized to acquire and hold under the provisions of this paragraph; and a Federal Reserve bank holding such shares of stock may, with the approval of the Board of Governors, sell such shares to any nonmember bank, financial institution, corporation, partnership, or to any other person. The price at which such shares may be sold by a Federal Reserve bank under this paragraph shall be subject to the approval of the Board of Governors. The aggregate amount of shares in any such corporation or corporations which may be owned or controlled by any member bank, by any nonmember bank, financial institution, corporation, partnership, or by any other person, or by any group or class of persons, may be limited by the Board in accordance with its general policies; and no one stockholder, other than a Federal Reserve bank, shall at any time, without the approval of the Board in accordance with such policies, own or control more than 10 per centum of the total outstanding shares of any such corporation.
“6. BORROWING POWER.—Each corporation shall have authority to borrow money and to issue its debentures, bonds, promissory notes, or other obligations under such general conditions and subject to such limitations and regulations as the Board of Governors may prescribe, but in no event shall any such corporation issue obligations which would cause the amount outstanding at any one time to exceed the amount of its paid-in capital stock and surplus. Notwithstanding any limitation contained in section 5136 of the Revised Statutes, each member bank is authorized to purchase and hold obligations of corporations organized under this section in an aggregate amount not exceeding 10 per centum of such bank's capital and surplus.
“7. INSURANCE OF SMALL LOANS.—(a) The corporation is authorized to insure financial institutions against losses which they may sustain as a result of loans (which shall include purchases of obligations representing loans) to enterprises eligible therefor under this section : Provided, That
“(1) in no case shall insurance underwritten by the corporation for any financial institution exceed 10 per centum of the total amount of the eligible loans made by such institution within such period as the Board of Governors may by regulation prescribe, and such insurance shall not exceed at any one time 95 per centum of the aggregate amount of such loans to any one small or independent business enterprise by such insured financial institution which are outstanding;
“(2) the aggregate principal amount of loans to one small or independent business enterprise insured hereunder shall not exceed $10,000 outstanding at any one time;
“(3) no insured loan shall be for a period longer than five years and thirty-two days; and
“(4) the rate of insurance premium, and the interest rate on insured loans, shall be in accord with regulations prescribed by the Board of Governors. “8. DIRECT LOANS.—The corporation shall have authority to make or acquire loans with or without security to both small and independent business enterprises which are eligible therefor, or to purchase obligations of such enterprises. Such loans, purchases, or other acquisitions may be made either directly or in cooperation with banks or other lending institutions, through agreements to participate or by the purchase of participations, commitments to purchase, or otherwise, as the corporation may determine.
“9. EQUITY FINANCING.—The corporation shall have authority to purchase and to resell to the issuer or to others, the income debentures, common or preferred stocks, or other capital shares of small and independent business enterprises eligible under this section.
"10. AGGREGATE LIMITATION.— Without the approval of the Board of Governors, the aggregate amount of obligations or securities acquired or for which commitments may be issued by the corporation under the provisions of this section which exceed the sum of $300,000 for any single enterprise shall not exceed 3343 per centum of the combined capital and surplus and maximum indebtedness of the corporation authorized by this section.
“11. EXEMPTIONS.—(a) The loans of any national banking association which are insured under this section or which are purchased by the corporation or for which a commitment to purchase is issued hereunder shall not be subject to the limitations on real estate loans prescribed in section 24 of the Federal Reserve Act as amended.
“(b) Paragraph (2) of subsection (a) of section 3 of the Securities Act of 1933, as amended, is hereby amended by adding at the end of such paragraph the following: ‘or any security issued by or representing an interest in or a direct obligation of a corporation organized under section 13b of the Federal Reserve Act, as amended ;'. Paragraph (3) of subsection (c) of section 3 of the Investment Company Act of 1940, as amended, is hereby amended by changing the period at the end of such paragraph to a semicolon and adding the following: 'or any corporation organized under section 13b of the Federal Reserve Act, as amended'. Paragraph (4) of subsection (a) of section 304 of the Trust Indenture Act of 1939 is hereby amended by changing the semicolon at the end of such paragraph to a comma and adding the following: ‘or any security issued by or representing an interest in or a direct obligation of a corporation organized under section 13b of the Federal Reserve Act, as amended ;'.
"(c) The corporation, its franchise, loans, and other assets, its capital stock, its surplus, its reserves, and its income, shall be exempt for a period of fifteen years from the date of its charter from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or other taxing authority; except that any real prop erty of the corporation shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.
“12. MISCELLANEOUS.—(a) Wherever practicable the financing operations of the corporation shall be undertaken in cooperation with member banks of the Federal Reserve System or with other banks or financial institutions, and any initial investigation and servicing required for loans or purchases of securities by the corporation under the provisions of this section may be handled through such banks or other financial institutions on a fee basis.
“(b) The corporation may make use, wherever practicable, of the advisory services of the Federal Reserve System and of the Department of Commerce which are available for and useful to industrial and commercial businesses, and may provide consulting and advising services on a fee basis and have on its staff persons competent to provide such services. Subject
the supervision and direction of the Board of Governors of the Federal Reserve System any Federal Reserve bank is authorized to act as a depository or fiscal agent for any corporation organized under this section. Such corporations may invest funds not reasonably needed for their current operations in direct obligations of, or obligations guaranteed as to principal and interest by, the United States.
“(C) Each corporation shall be subject to examinations made by direction of the Board of Governors of the Federal Reserve System or by a Federal Reserve bank designated by the Board by examiners selected or approved by the Board, the cost of such examinations, including the compensation of the examiners, to be fixed by the Board and to be paid by the corporation examined; and every such corporation shall make such reports to the Board of Governors at such times and in such form as the Board may require.
“(d) Should any corporation organized hereunder violate or fail to comply with any of the provisions of this section, all of its rights, privileges, and franchises derived herefrom may thereby be forfeited. Before any such corporation shall be declared dissolved, or its rights, privileges, and franchises forfeited, any noncompliance with, or violation of this section shall, however, be determined and adjudged by a court of the United States of competent jurisdiction, in a suit brought for that purpose in the district or Territory in which the principal office of such corporation is located, which suit shall be brought by the United States at the instance of the Board of Governors of the Federal Reserve System or the Attorney General.
“(e) Any corporation organized under this section may at any time within the two years next previous to the date of the expiration of its corporate existence, by a vote of the shareholders owning two-thirds of its stock, apply to the Board of Governors for its approval to extend the period of its corporate existence for a term of not more than thirty years, and upon certified approval of the Board of Governors such corporation shall have its corporate existence for such extended period unless sooner dissolved by the act of the shareholders owning two-thirds of its stock, or by an Act of Congress or unless its franchise becomes forfeited as herein provided.
“(f) Whenever in the judgment of the Board of Governors of the Federal Reserve System any person has engaged or is about to engage in any acts or practices which constitute or will constitute a violation of any provision of
this section or of any regulation thereunder, the Board may make application to the proper district court of the United States, or the United States Courts of any Territory or other place subject to the jurisdicion of the United States, for an order enjoining such acts or practices, or for an order enforcing compliance with such provision, and such courts shall have jurisdiction of such actions and upon a showing by the Board that such person has engaged or is about to engage in any such acts or practices a permanent or temporary injunction, restraining order, or other order shall be granted without bond.
“(g) Section 1014 of title 18 of the United States Code is amended by inserting the phrase 'or a corporation organized under section 13b of the Federal Reserve Act' after the words 'Federal Reserve Bank.'
“(h) Notwithstanding this amendment to this section 13b, the Federal Reserve banks, for a period of one year following the effective date of this amendment, shall continue to possess and have the right to exercise all authority conferred upon them by the provisions of this section as it existed prior to the effective date of this amendment. Nothing herein shall affect the power of any Federal Reserve bank to carry out, or protect its interest under, any agreement or transaction heretofore or hereafter made or entered into in carrying on operations pursuant to such authority. All or part of the assets held by any Federal Reserve bank which have been or may hereafter be acquired by it pursuant to such authority may be purchased by any corporation organized under this section with the consent of such Reserve bank.
“(i) Within sixty days after the effective date of this amendment, each Federal Reserve bank shall pay to the United States the aggregate amount which the Secretary of the Treasury has heretofore paid to such bank under the provisions of this section as heretofore existing; and such payment shall constitute a full discharge of any obligation or liability of the Federal Reserve bank to the United States or to the Secretary of the Treasury arising out of subsection (e) of this section as heretofore existing or any agreement thereunder. The amount repaid to the United States pursuant to this paragraph and any remaining balance of the funds set aside in the Treasury for payments under this section as heretofore existing shall be covered into miscellaneous receipts.
“(j) Neither the United States nor any Federal Reserve bank shall have any liability with respect to any obligations entered into, or stocks issued, or commitments made, by any corporation organized under this section.
“(k) Financial assistance available to small and to independent business enterprises through corporations organized under this section shall be taken into consideration by the Reconstruction Finance Corporation in determining whether financial assistance for which application is made to it by a business enterprise is otherwise available on reasonable terms within the meaning of section 4 (b) (1) of the Reconstruction Finance Corporation Act, as amended.”
[S. 3386, 81st Cong., 2d sess.) .A BILL To aid small business, to assist in promoting maximum employment and produc
tion, and to encourage the free flow of capital into small business enterprises
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the “Small Business Act of 1950”.
TITLE I-AMENDMENTS TO RECONSTRUCTION FINANCE
SEC. 101. Subsection (a) of section 4 of the Reconstruction Finance Corporation Act, as amended, is amended by adding three new paragraphs to read as follows:
“(5) To insure banks or other lending institutions against losses which they may sustain as a result of loans to or purchases of obligations representing loans to small business enterprises. In no case shall insurance underwritten by the Corporation under this paragraph exceed 10 per centum of the total amount of such loans or purchases of an insured bank or other lending institution. In addition to such insurance conditions as may be prescribed by the Corporation
“(A) not more than $100,000 of loans or obligations of one small business enterprise may be insured ;
"(B) no insured loan or obligation shall be for a period longer than ten years;
“(C) the rate of insurance premium and the interest rate on insured loans or obligations shall be fixed by the Corporation; and
“(D) notwithstanding a lack of commercial assets, collateral, or security, no audits or appraisals shall be required on insured loans or obligations but banks or other lending institutions shall certify to the borrower's good personal and business reputation. “(6) To purchase, service, or sell any loans, which are insured under paragraph (5) of this subsection, but no loan may be purchased for an amount exceeding the unpaid principal balance thereof, plus accrued interest, at the time of the purchase. No loan shall be purchased unless the seller certifies that the loan is insurable under the standards prescribed for insurance of loans by the Corporation according to the provisions of paragraph (5) of this subsection. The Corporation is authorized to borrow money for the purposes of this paragraph through the issuance of notes or other such obligations. The total amount of purchases and commitments made by the Corporation under the provisions of this paragraph shall not exceed $750,000,000 outstanding at any one time.
“(7) Subject to such limitations, restrictions, and regulations as the Corporation may prescribe, to guarantee any bank or lending institution against loss of principal or interest on, or may make a commitment to purchase and thereafter purchase from a bank or other lending institution, any loan which has a maturity of not more than fifteen years, made to a small business enterprise for the purpose of financing (A) alterations, repairs, and improvements upon or in connection with existing structures or the building of new structures upon real property by the owners thereof or by lessees of such real property under a lease expiring not less than six months after the maturity of the loan, or (B) the purchase of equipment or fixtures extends beyond the maturity of the loan, if such structures, equipment, or fixtures are not held by the small business enterprise primarily for sale to customers in the ordinary course of trade or business. The Corporation shall not guarantee or make a commitment to purchase under this paragraph more than 90 per centum of the unpaid balance of any loan. The aggregate amount of guaranties and commitments under this paragraph ontstanding at any one time, together with the amount of loans acquired thereunder and held at the same time, shall not exceed $500,000.000.”
SEC. 102. Subsection (b) (1) of section 4 of the Reconstruction Finance Corporation Act, as amended, is amended by striking out the period at the end thereof and inserting a colon and the following: “Providing, That in order to encourage small business ent rprises the Corporation is authorized to give accounts receivable, inventories, including raw materials, work in progress, and finished goods, management skills, past earnings, and prospective earnings consideration over security in the form of other types of collateral, in the making of loans either directly or in cooperation with banks or other lending institutions under paragraph (1) of subsection (a) of this section for the purpose of establishing new business enterprises or for meeting the long-term capital requirements of existing small business enterprises. The Corporation shall make direct loans pursuant to the foregoing proviso only in those cases where loans cannot be consummated in cooperation with banks or other lending institutions."
SEC. 103. Subsection (b) (2) of section 4 is amended by adding before the period at the end of the first sentence thereof a colon and the following : “Provided further, That any loan made under section 4 (a) (1) for the purposes set forth in the proviso in paragraph (1) of this subsection as amended may be made for such period exceeding ten years as the Corporation may deem proper for the encouragement of small business enterprises."
SEC. 104. Subsection (b) (3) of section 4 is amended by striking out the period at the end thereof and inserting a colon and the following: “Provided, That such participations by the Corporation may amount to 90 per centum of the loan outstanding at the time of the disbursement, in the case of loans made for the benefit of small business enterprises in pursuance of the authority set forth in the proviso in subsection (b) (1) of this section as amended. In order to encourage loans in cooperation with banks or oth r lend ng institutions un'er the proviso in subsection (b) (1) of this section as amended, priority shall be given to private lending institutions over the Corporation against the assets of borrowers for the satisfaction of such loans made thereunder.”
SEC. 105. Subsection (g) of section 4 is amended to read as follows: “(g) As used in this Act,
“(1) The term 'State includes the District of Columbia, Alaska,, Hawaii, Puerto Rico, and the Virgin Islands.
“(2) The term 'small business enterprise' means any business enterprise determined to be a small business enterprise by the Small Business Coor
dinator in accordance with section 306 of the Small Business Act of 1950." SEC. 103. Section 4 is amended by adding at the end thereof a new subsection to read as follows:
“(i) Those functions of the Corporation dealing with loans to and the insurance, guaranty, purchase, service, or sale of loans to small business enterprises shall be administered independently of the Board of Directors of the Corporation by a Small Business Division, which is hereby created as a division within the Corporation. The management of the Small Business Division shall be vested in a Director of such Division appointed by the President of the United States by and with the advice of the Senate. The office of Director of the Small Business Division shall be a full-time position. The term of the Director shall be for a term of three years, but he may continue in office until his successor is appointed and qualified. The Director shall receive basic compensation at the rate of $15,000 per annum. The Director shall utilize the facilities and personnel of the Corporation to the fullest extent practicable in administering the provisions of this Act."
TITLE II-SMALL BUSINESS PARTICIPATION IN GOVERNMENT
SEC. 201. (a) It is the policy of Congress that a fair and substantial portion of the supplies or services purchased, or contracted for, by Government agencies shall be furnished by small business enterprises.
(b) Every Government agency which procures or contracts for supplies or services shall issue regulations and prescribe conditions to the end that small business enterprises shall receive a fair and substantial portion of any procurement of such supplies or services.
Sec. 202. The heads of the National Military Establishment and the General Services Administration shall coordinate efforts in the formulation of regulations and prescribing of conditions, as required herein, for their respective agencies, toward the end of achieving uniformity wherever practicable. Insofar as practicable, the head of each other Government agency shall conform such regulations and conditions for his agency to those of the General Services Administration. In the procurement of supplies or services each Government agency shall accept certifications issued by the Small Business Coordinator pursuant to section 402 (4) of title III of this Act.
SEC, 203. As used in this title
(A) The term “Government agency' includes any Government agency, department, bureau, commission, administration, or other instrumentality, including Government-owned or controlled corporations, and any establishment in the legislative or judicial branch.
(B) The term “small business enterprise” means any business enterprise determined to be a small business enterprise by the Small Business Coordinator in accordance with ection 306 of this Act.
TITLE III-SMALL BUSINESS COORDINATOR
SEC. 301. (a) There is hereby established in the Executive Office of the President a Small Business Coordinator (hereinafter called the “Coordinator”) who shall be appointed by the President, by and with the advice and consent of the Senate, and shall receive compensation at the rate of $15,000 per annum.
(b) The Coordinator shall assist the President in the coordination of the activities of the executive agencies in furtherance of the interests of independent small business concerns and perform such other functions pursuant to this Act as the President may designate. For this purpose the Coordinator shall make or cause to be made such studies, require such reports and information from executive agencies, and consult with such representatives of industry, agriculture, labor, consumers, State and local governments, and other groups, as he deems necessary.
(c) To the fullest extent practicable, the Coordinator shall utilize the facilities and personnel of other executive agencies. Within the limits of funds which may be made available, he may employ and fix the compensation of such officers and employees, and may make such expenditures for supplies, facilities, and services as may be necessary to carry out his functions. The Coordinator may appoint not to exceed six deputies, specialists, or other experts without regard to