"(e) The Commission may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add to the securities exempted as provided in this section any class of securities issued by a national investment company under the National Investment Company Act of 1957, if it finds, having regard to the purposes of that Act, that the enforcement of this title with respect to such securities is not necessary in the public interest and for the protection of investors."

TAX PROVISIONS

SEC. 108. (a) Section 851 (a) (1) of the Internal Revenue Code of 1954 is amended by inserting before the word "registered" the following: "chartered under the National Investment Company Act of 1957 as a national investment company or is".

(b) Section 851 (b) (2) of the Internal Revenue Code of 1954 is amended by inserting immediately after the words “90 percent" the following: “(75 percent in the case of a national investment.company chartered under the National Investment Company Act of 1957)".

(c) Section 851 of the Internal Revenue Code of 1954 is amended by adding at the end thereof a new subsection as follows:

"(f) EXEMPTION OF NATIONAL INVESTMENT COMPANIES FROM LIMITATIONS OF SUBSECTION (b) (4).—If the Board of Governors of the Federal Reserve System determines that it is necessary and appropriate to accomplishment of the purposes of the National Investment Company Act of 1957 that any national investment company chartered under such Act be exempt from the requirements of this subsection (b) (4), it shall certify such determination to the Secretary or his delegate and, in such event, the limitations prescribed in subsection (b) (4) shall not apply to such national investment company."

(d) (1) Section 852 (a) of the Internal Revenue Code of 1954 is amended by adding at the end thereof the following: "The investment company taxable income of a regulated investment company which is a national investment company chartered under the National Investment Company Act of 1957 shall, for purposes of paragraph (1), be increased by the amounts described in subsection (d) (3) (D) and decreased by the amounts described in subsection (d) (5) (B).” (2) Section 852 of the Internal Revenue Code of 1954 is amended by adding at the end thereof a new subsection as follows:

"(d) NATIONAL INVESTMENT COMPANY RESERVE.—

"(1) RESERVE GENERALLY.-A regulated investment company which is a national investment company chartered under the National Investment Company Act of 1957 may, under regulations prescribed by the Secretary or his delegate establish and maintain a reserve subject to the limitations provided in this subsection.

"(2) LIMITATION ON RESERVE.-The amount of the reserve shall not at any time exceed the lesser of

"(A) 50 percent of the invested capital of the company as defined in paragraph (7), or

"(B) the accumulated earnings and profits determined as of the close of the taxable year.

"(3) CHARGES TO RESERVE.-The reserve shall be charged as of the end of the taxable year (whether or not such charge produces a minus amount in the reserve) with the following:

"(A) the net capital loss for the taxable year (as defined in section 1222 (10));

"(B) the net operating loss for the taxable year (as defined in section 172 (c));

"(C) the Federal income taxes attributable to the amount added to the reserve under paragraph (5); and

"(D) such amount as may be necessary by reason of the limitation provided in paragraph (2).

"(4) MANDATORY ADDITIONS TO THE RESERVE.-There shall be added to the reserve as of the close of the taxable year the following:

"(A) an amount equal to the excess of the net capital gain for the taxable year computed without regard to section 1212 (relating to capital loss carry-over) over the net capital gain for the taxable year; and

"(B) an amount equal to the excess of the taxable income for the taxable year computed without regard to section 172 (relating to the

net operating loss deduction) over the taxable income for the taxable year.

"(5) DISCRETIONARY ADDITION TO THE RESERVE.-In any year in which an amount (other than the amount described in paragraph (4) is added to the reserve; the company shall, in the computation of its investment company taxable income be allowed

"(A) a deduction equal to such amount of the addition to the reserve as does not cause the aggregate amount of the reserve (including: such addition) to exceed 20 percent of the invested capital of the company as defined in paragraph (7); and

"(B) the dividends received credit provided in section 243 but such credit shall not exceed 85 percent of the portion of amounts added to the reserve under this subparagraph which is not deductible from investment company taxable income under subparagraph (A).

"(6) REDUCTION OF TERMINATION OF RESERVE.-In the event of a reduction or termination of the reserve in connection with a partial or complete liquidation of the company (or of any company to which the reserve has been transferred in an exchange upon which gain was not recognized by reason of any provision of this subtitle) the gain realized by a stockholder upon any such liquidation shall, to the extent of the pro rata share of the reserve, be considered as a gain from the sale or exchange of property held for less than six months.

"(7) INVESTED CAPITAL.-For purposes of paragraph (2), the term 'invested capital' means the sum, determined as of the close of the taxable year, of

"(A) the amount of money or property (included in an amount equal to its unadjusted basis without regard to the value of the property as of March 1, 1913, except that if such basis is a substituted basis, it shall be adjusted, with respect to the period before the property was paid in, by an amount equal to adjustments proper under section 312 (f) for determining earnings and profits) previously paid in for stock, or as paid-in surplus or as a contribution to capital, reduced by the amount of distributions not out of earnings and profits in the year of distribution and not out of accumulated earnings and profits; and

"(B) the amount of the outstanding indebtedness (not including interest) of the company which is evidenced by a bond, note, bill of exchange, debenture, certificate of indebtedness, mortgage, or deed of trust, except that indebtedness not represented by a bond or debenture shall not be included in excess of an amount equal to the average daily amount of indebetedness not so represented which was outstanding during the taxable year."

(e) Each national investment company established under this title, including its franchise, capital, reserves, and surplus, its income, its real property, its tangible and intangible personal property, its obligations (both as in principal and income derived therefrom), shall be subject to taxation, in the same manner and to the same extent as a State-chartered institution of similar character by any State, county, municipality, or local taxing authority or by any Territory. dependency, or possession of the United States; and its real property shall be subject to special assessments for local improvements.

MISCELLANEOUS

SEC. 109. (a) Wherever practicable the operations of a national investment company shall be undertaken in cooperation with banks or other financial institutions, and any servicing or initial investigation required for loans or acquisitions of securities by the company under the provisions of this title may be handled through such blanks or other financial institutions on a fee basis.

(b) Each national investment company 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 advisory services on a fee basis and have on its staff persons competent to provide such services. Subject to the supervision and direction of the Board, any Federal Reserve bank is authorized to act as a depository or fiscal agent for any company organized under this title. Such companies 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) The Board is authorized to prescribe regulations governing the operations of national investment companies and to carry out the provisions of this title in accordance with the purposes of this Act. Each national investment company shall be subject to examinations made by direction of the Board by examiners selected or approved by the Board, and the cost of such examinations, including the compensation of the examiners, may in the discretion of the Board be assessed against the company examined and when so assessed shall be paid by such company. Every such company shall make such reports to the Board at such times and in such form as the Board may require.

(d) The Secretary of Commerce is authorized to advise and assist in promoting national investment companies.

(e) Should any national investment company violate or fail to comply with any of the provisions of this title or of regulations prescribed hereunder, all of its rights, privileges, and franchises derived herefrom may thereby be forfeited. Before any such company shall be declared dissolved, or its rights, privileges, and franchises forfeited, any noncompliance with or violation of this title 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 company is located, which suit shall be brought by the United States at the instance of the Board or the Attorney General.

(f) Whenever in the judgment of the Board 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 title 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 jurisdiction 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) Any national investment company 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 for approval to extend the period of its corporate existence for a term of not more than thirty years, and upon approval of the Board as provided in section 101 hereof such company shall have its corporate existence extended for such 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.

(h) Nothing in this Act or in any other provision of law shall be deemed to impose any liability on the United States or on any Federal Reserve bank with respect to any obligations entered into, or stocks issued, or commitments made, by any company organized under this title.

TITLE II-CHANGES IN FEDERAL RESERVE AUTHORITY

REPEAL OF SECTION 13B OF THE FEDERAL RESERVE ACT

SEC. 201. Effective one year after the date of enactment of this Act, section 13b of the Federal Reserve Act (12 U. S. C. 352a) is hereby repealed; but such repeal shall not affect the power of any Federal Reserve bank to carry out, or protect its interest under, under agreement theretofore made or transaction entered into in carrying on operations under that section.

RETURN OF FUNDS TO TREASURY

SEC. 202. (a) Within sixty days after the enactment of this Act, each Federal Reserve bank shall pay to the United States the aggregate amount which the Secretary of the Treasury has heretofore paid to such bank under the provisions of section 13b of the Federal Reserve Act; and such payment shall constitute a full discharge of any obligation or liabiilty of the Federal bank to the United States or to the Secretary of the Treasury arising out of subsection (e) of said section 13b or out of any agreement thereunder.

(b) The amounts repaid to the United States pursuant to section 202, and any remaining balance of the funds set aside in the Treasury for payments under section 13b of the Federal Reserve Act shall be covered into miscellaneous receipts.

AUTHORITY TO SELL ASSETS TO NATIONAL INVESTMENT COMPANIES

SEC. 203. Any national investment company organized under this act may purchase from any Federal Reserve bank, and any Federal Reserve bank is authorized to sell to any such company, at such reasonable price as may be agreed upon, any or all of the assets heretofore or hereafter acquired by such Reserve bank under the provisions of section 13b of the Federal Reserve Act.

TITLE III-MISCELLANEOUS PROVISIONS

PENALTIES

SEC. 301. Title 18, United States Code, section 1014, is amended by inserting the phrase "a national investment company organized under title II of the National Investment Company Act of 1957," after the words "National farm loan association,”.

GEOGRAPHIC APPLICABILITY

SEC. 302. The authority provided in this Act shall be applicable in the United States, including the District of Columbia and the Territories and possessions.

RIGHT TO AMEND THIS ACT

SEC. 303. The right to amend, alter, or repeal this Act is hereby expressly reserved.

AUTHORIZATION OF APPROPRIATIONS

SEC. 304. There are hereby authorized to be appropriated such sums as may be required to carry out the purposes of this Act.

[S. 720, 85th Cong., 1st sess.]

A BILL To make credit more readily available for financing small business by insuring loans made to small business enterprises

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE

SECTION 1. This Act may be cited as the "Small Business Credit Act of 1957".

DECLARATION OF POLICY

SEC. 2. It is the policy of the Congress

(a) to foster the development and growth of independent small-business enterprises with the objective of enabling them to make their maximum contribution to productive investment and employment and to the economic stability and growth of the Nation;

(b) to make credit for such enterprises more readily available in adequate amounts and on reasonable terms; and

(c) to facilitate maximum participation of private financial institutions and investors in financing these enterprises by insuring loans which are made by private lending institutions to small business.

TITLE I-INSURANCE OF LOANS FOR SMALL BUSINESS

AUTHORITY TO INSURE

SEC. 101. The Administrator of the Small Business Administration (hereafter referred to in this Act as the Administrator) is authorized upon such terms and conditions as he may prescribe to insure such lenders as he finds to be qualified by experience or facilities and approves as eligible for credit insurance against loss of principal and interest which may be sustained by them as a result of loans made to small-business enterprises. Such a lender is hereinafter referred to as an "approved lender".

OVERALL LIMIT OF INSURANCE

SEC. 102. The aggregate principal amount of loans with respect to which insurance may be granted under this title shall not exceed $250,000,000 outstanding

at any one time: Provided, That on or after July 1, 1958, the President may increase this limit to not more than $750,000,000.

SCOPE OF INSURANCE AND INSURANCE RESERVE

SEC. 103. The insurance granted under this title shall provide for the reimbursement of losses to any approved lender and which reimbursement shall not exceed the lesser of—

(a) 90 per centum of the unpaid balance of any loan, including accrued interest at the time of default;

(b) the insurance reserve of the insured lender on the date the claim for reimbursement of loss is approved for payment.

The insurance reserve of each lender shall be initially computed as 10 per centum of the total amount of loans on which premiums have been paid and shall be diminished by the amount of claims approved for payment. The insurance reserve, if any, to the credit of any lender may, from time to time, be further diminished, but only pursuant to the contract between the Administrator and such insured lender.

MAXIMUM PREMIUM CHARGE

SEC. 104. The Administrator shall fix a premium charge for the insurance granted under this title in an amount not to exceed 11⁄2 per centum per annum of the principal amount of each loan, payable in advance, at such time and in such manner as he may prescribe.

TYPE OF LOAN COVERED

SEC. 105. (a) Insurance granted under this title shall provide for the reimbursement of losses only with respect to loans bearing such interest, having such maturities, and subject to such other terms and conditions as required in accordance with regulations prescribed by the Administrator in force at the time the insurance is granted.

(b) No further insurance shall be granted under this title with respect to any borrower if the total outstanding amount of all loans of such borrowers insured under this title would thereby exceed $250,000, or with respect to any loan whose maturity is in excess of five years and thirty-two days.

(c) No insurance shall be granted under this title for any loan for agricultural purposes, as determined in accordance with regulations issued by the Administrator after consultation with the Secretary of Agriculture, or with respect to any loan which is eligible to be insured under the National Housing Act, as amended.

(d) Any loan with respect to which insurance is granted under this title may be refinanced or extended with continued protection under this title in accordance with such regulations as the Administrator may prescribe: Provided, That the amount or unexpired term of any such loan shall not be in excess of the limitations contained in paragraph (b) of this section.

TRANSFER OF INSURANCE BETWEEN INSTITUTIONS

SEC. 106. The Administrator, under such regulations as he may prescribe, may permit the transfer to any approved lender any insurance in connection with loans which such lender wishes to purchase from another approved lender.

REVOLVING FUND

SEC. 107. (a) The premiums and other moneys received by the Administrator in the course of operations under this title shall be deposited in a revolving fund in the Treasury of the United States. The revolving fund shall be available for defraying the operating expenses incurred under this title, and for the payment of claims in connection with the insurance granted under this title. (b) For the purposes of carrying out the provisions of this title, there are hereby authorized to be appropriated to the revolving fund provided in this section

(1) the sum of $10,000,000 for the initial establishment of the revolving fund; and

(2) such further sums, if any, as may become necessary for the adequacy of the revolving fund.