Fifty-three percent of the entrepreneurs increased their incomes enough to cross the poverty line (using 150 percent of the poverty line as the reference point). Entrepreneurs reduced their reliance on government assistance by 61 percent with the The business survival rate was 49 percent over five years, which is comparable to Census Bureau and Internal Revenue Service survival rates for businesses with characteristics similar to the sampled microenterprises. The SELP study reinforces the argument that microenterprise organizations are critical to low income entrepreneurs. As stated, existing funding for microenterprise programs is largely in the form of credit. However, credit without training may produce limited success. PRIME is not a microcredit program, but rather will provide training and technical assistance to low-income entrepreneurs or prospective entrepreneurs. While access to credit is important to microentrepreneurs, data now shows that the need for entrepreneurial training and technical assistance is greater, especially for low-income individuals who require higher levels of intensive technical assistance, training, and support. The Committee strongly supports this initiative at the requested level of $15 million. COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND The Administration is requesting $125 million in FY 2001 for the Community Development Financial Institutions (CDFI) Fund. The CDFI Fund was established by the Riegle-Neal Community Development and Regulatory Improvement Act of 1994 to encourage new and existing financial institutions to provide resources and related services in economically distressed areas. Financial assistance from the CDFI Fund must be matched dollar for dollar by non-federal sources. Authorization for the program ended in 1998, but the program received appropriations of $95 million in FY 1999 and $95 million in FY 2000. During the 105th Congress, the Subcommittee on General Oversight and Investigations conducted an investigation of the CDFI Fund, which revealed significant administrative irregularities in the management of the program. The Department of Treasury took strong corrective measures to address these deficiencies which established more rigorous procedures to identify conflicts of interest between CDFI Fund personnel and outside contractors involved in the grant process, development of post-award monitoring procedures to ensure grant recipient's compliance with assistance agreements, and installation of new management, including a new director, in January 1998. The Administration's $125 million request represents an increase over the reauthorization level approved by the Committee last year in H.R. 629, the Community Development years, FY 2000 – FY 2003, at levels of $95 million, $100 million, $105 million, and $110 million. To strengthen assurances that previous management deficiencies do not recur, H.R. 629 establishes additional management controls, including requiring the Fund to use a scoring system as one of the tools to evaluate the merits of applications and using multiperson review panels to apply the objective scoring system. The legislation also calls on the GAO to submit a report to Congress evaluating the structure, governance, and performance of the Fund. The $125 million request for FY 2001 represents a 31.6 percent increase over the FY 2000 appropriation of $95 million. Last year, the Committee approved an FY 2001 authorization level of $100 million, and plans to review prospects for the Administration's higher funding request. INTEREST ON STERILE RESERVES The banking industry – banks, savings associations and credit unions - are statutorily required to maintain a certain amount of cash on hand or reserves at the Federal Reserve Banks based on the amount of transaction accounts they hold. As a general matter, financial institutions with less than $50 million in assets are not subject to these reserve requirements. The Federal Reserve uses the reserves as a tool in managing the money supply. The reserves are called "sterile reserves" because the Federal Reserve Banks do not pay interest on such reserves. The Federal Reserve strongly supports the payment of interest on required reserves for monetary policy reasons. The amount of "sterile reserves" has dropped dramatically in the last 10 years from $35 billion to as low as $5.6 billion. The Federal Reserve's ability to conduct monetary policy has not been affected, but the Federal Reserve is concerned that if reserves continue to drop, its ability to conduct monetary policy will be impaired. The House approved legislation last Congress (H.R. 4364) which would have directed the Federal Reserve to pay interest on sterile reserves. Several legislative proposals have been introduced in the 106th Congress which would authorize the Federal Reserve to pay interest on sterile reserves, including H.R.1585 which was the subject of a Banking Committee hearing in May of 1999. The Senate Banking Committee favorably reported legislation last year which would authorize the Federal Reserve to pay interest on sterile reserves. The Committee continues to support the payment of interest on sterile reserves and intends to consider this approach, perhaps in the context of broader legislation which also includes the right of financial institutions to pay interest on business demand accounts. Last year, the CBO estimated that Federal Reserve payments of interest on required reserves would cost approximately $660 million over 5 years. The CBO is currently updating its cost estimates. Domestic and International Monetary Policy OVERVIEW Funding items under the jurisdiction of the Committee are largely contained in the International Affairs Budget (Function 150). A large number of multi-year authorization requests for the International Financial Institutions (IFIs) that were pending before the Committee during the first session of the 105th Congress were ultimately included in the Consolidated Appropriations Act for FY 2000 (H.R. 3194; P.L. 106-113). Consequently, no authorization requests for the international financial institutions are pending before the Committee for fiscal 2001. Authorizations for the IFIs in P.L. 106-113 included a general capital increase for the African Development Bank (AFDB); the U.S. contribution to the eighth replenishment of the African Development Fund (AFDF); the U.S. contribution to a general capital increase for the Inter-American Investment Corporation (IIC); the U.S. contribution to the twelfth replenishment of the International Development Association (IDA); and the U.S. contribution for the first general capital increase of the Multilateral Investment Guarantee Agency (MIGA). In addition, last year the Committee was also asked to authorize several debt reduction initiatives associated with the modified Heavily Indebted Poor Countries (HIPC) Initiative. The Banking Committee considered and favorably reported legislation (H.R. 1095) which fully authorized U.S. participation in the modified HIPC Initiative. It authorized the Executive Branch to cancel 100 percent of the debt owed to the U.S. by up to 45 eligible heavily indebted poor countries. It also provide authorization for U.S. contributions to the World Bank's HIPC Trust, as well as U.S. agreement to mobilizing IMF gold reserves and the transfer of resources from an IMF reserve account to finance the Fund's participation in the modified HIPC Initiative. The full authorization for bilateral debt relief and for IMF gold sales was included in the Consolidated Appropriations Act for FY 2000. Not included, however, was an authorization for a three-year $600 million contribution to the World Bank's HIPC Trust Fund. In addition, Congress only allowed the U.S. to support using approximately two-thirds of the profits from IMF off-market gold sales for debt relief. The only authority for bilateral debt cancellation not included in last year's omnibus The Administration's FY 2000 supplemental budget request calls for full authorization for a $600 million commitment to the HIPC Trust Fund over the next three years; a $210 million appropriation request for the Trust Fund for FY 2000; and authorization allowing the IMF to cover its cost of debt relief by permitting full use of the income on proceeds from IMF offmarket gold sales. The FY 2001 budget request for debt relief includes $225 million ($150 million for the HIPC Trust Fund and $75 million to reduce bilateral debt), and $375 million in advance appropriations ($240 million for the HIPC Trust Fund for FY 2002 and $135 million for bilateral debt reduction costs for FY 2003). In addition, the Committee will consider legislation (H.R. 3519) that directs the U.S. to establish a new AIDS Prevention Trust Fund at the World Bank. The bill authorizes U.S. contributions of $100 million a year for five years, with the goal of ultimately raising $5 billion from other governments and the private sector. The proceeds of the trust fund would support AIDS education, prevention, treatment, and vaccine development efforts in the world's most afflicted developing countries, particularly in Sub-Saharan Africa. CURRENCY AND COINAGE The Committee also has jurisdiction over currency and coinage. However, no authorization request is pending from the Bureau of Engraving and Printing and the U.S. Mint because both operate under revolving funds which, in effect, amount to permanent authorization of appropriations. Bureau operations during 1999 resulted in an increase to retained earnings of $38 million. In 1999, the Mint transferred over $1 billion to the general fund. In January 1999 the Mint launched the 50 States Circulating Commemorative Quarter Program (P.L. 105-124), the largest, longest-running sequence of design changes in the history of U.S. circulating coinage. From 1999 to 2008 the Mint will produce and issue five new quarter designs each year. The obverse of these quarters will continue to feature the profile of George Washington, but the reverse will bear a design honoring five states each year in the order they ratified the Constitution or joined the Union. This is the first change in design of quarters since 1976. In 2000, the quarters will honor Massachusetts, Maryland, South Carolina, New Hampshire, and Virginia. This program should produce savings for the Federal government of $5 billion dollars or more in "seigniorage," depending on the popularity of the program with the collecting public. These savings are not scorable for budgetary purposes but they are real, in that they replace funds the government would otherwise have to borrow, and therefore represent interest avoided. The new "Golden Dollar," also enacted in the 105th Congress, began circulation early in calendar 2000. It will replace the unpopular Susan B. Anthony one-dollar coin. If this coin ultimately gains widespread consumer acceptance, it could also result in significant gains in seigniorage. 63-371 00-2 During the mid-1990s, Commemorative Coin Programs fell victim to vast overproduction and excessive sales. Despite legislative language in requiring the minting of these coins to result in no net cost to the government, some programs suffered losses. Congressionally authorized mintages were far in excess of demand in secondary markets, as Congress used the commemorative coin programs to raise funds for a wide variety of private organizations. As a result, prices offered by dealers fell. In turn, collectors came to view the hobby of collecting U.S. commemoratives as too expensive and unrewarding. The Banking Committee-sponsored Commemorative Coin Reform Act (CCRA), passed in the 104th Congress, imposes strict limits on the number of annual commemorative programs (two per year beginning in 1999) and the mintages that may be authorized in those programs. The CCRA also imposes financial requirements on organizations that benefit from these programs and helps protect the Mint from incurring financial losses in executing them. The Committee believes that CCRA reforms should be the basis for consideration of any new coin program. THE INTERNATIONAL FINANCIAL INSTITUTIONS The FY 2000 supplemental budget requests $210 million in appropriations for the World Bank's HIPC Trust, an authorization request for the Trust over three years of $600 million, and authorization to use the remaining interest earnings from the profits of off-market IMF gold sales for HIPC debt reduction. During the first session of the 105th Congress, the Banking Committee fully authorized these important debt relief programs. The total appropriations request for FY 2001 for the IFIs is $1.35 billion. The request is about $40 million less than in FY 2000. Of that amount, about $1.18 billion is to meet scheduled U.S. commitments. Those commitments are now reflected in a steady annual cost of about $1.2 billion. The currently level of expenditures is more than $700 million (37 percent) below peak U.S. commitments in FY 1996 of $1.9 billion. The FY 2001 request includes payments toward the five new authorizations approved by Congress in FY 2000: IDA-12; the African Development Bank; the African Development Fund; MIGA; and the Inter-American Investment Corporation. An additional $167 million is requested for partial clearance of arrears, which increased last year (reversing two years of progress) by $116 million to $451 million. The FY 2001 request also seeks funding for ongoing debt restructuring programs, which are consistent with legislation proposed by the Committee last year. For the HIPC Initiative, Treasury is requesting $150 million for the World Bank's HIPC Trust Fund. The HIPC Trust Fund provides funds to the regional international institutions, principally multilateral development banks (MDBs), that cannot fully finance participation in the modified HIPC Initiative from existing internal resources. The U.S. contribution to the HIPC Trust Fund will leverage contributions from other creditors, and is essential to ensure the success of the debt relief initiative. For the HIPC bilateral program in FY 2001, the Administration is |