§4531 Presidential Authorization for the National Defense

Summary

The President can let a federal guaranteeing agency promise to back loans from private lenders so contractors, suppliers, or other companies can make, speed up, protect, or restore things needed for national defense. Unless Congress or the President has declared a national emergency, the President must find that the loan supports an essential defense item, that the borrower cannot get credit on reasonable terms, that the guarantee is the best and quickest option, that the borrower looks likely to repay and has acceptable security, that the interest rate is set by the Secretary of the Treasury based on similar U.S. debt, that the loan cannot be changed without the U.S. fiscal agent’s consent, and that the borrower provides an assurance of repayment plus security worth at least 20% of the loan. Loans can only be guaranteed if Congress first provides budget authority for the cost and sets a limit on total guaranteed principal. Any federal agency or a Federal Reserve bank the President names can act as the fiscal agent to make the guarantees and be paid back for expenses, including legal costs. The President supervises these actions and can set fees, interest rules, and uniform forms and procedures. If guarantees for a domestic industrial shortfall would push total outstanding guarantees above $50,000,000, the President must notify the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services in writing and wait 30 days before making the guarantee, unless there is a national emergency or the President personally finds a specific guarantee is urgently needed to avoid a severe defense shortfall. The authority cannot mainly be used to save a failing company from bankruptcy unless the President certifies the failure would directly and seriously hurt defense production and sends that certification and a detailed justification to those two committees at least 10 days before using the authority.