Emergency Government Guarantee Loan Programs — Steel and Oil & Gas

Congress occasionally responds to economic crises in specific industries by creating time-limited federal loan guarantee programs — backstops that allow struggling companies to borrow from private lenders at commercially available terms, with the federal government guaranteeing repayment of up to 85% of the principal if the borrower defaults. Two such programs were created at the turn of the millennium: the Emergency Steel Loan Guarantee Program (13 CFR Part 400) and the Emergency Oil and Gas Guaranteed Loan Program (13 CFR Part 500). Both were enacted in response to import-driven price collapses that threatened major domestic industries, both used an identical governance structure, and both have since expired — but the regulations remain in the Code of Federal Regulations as a template for future emergency guarantee programs and as the legal authority governing any residual obligations from guarantees issued before the programs closed.

Legal Authority

• 15 U.S.C. § 1841 et seq. — Emergency Steel Loan Guarantee Act of 1999 (Pub. L. 106-51): authorizes the Emergency Steel Guarantee Loan Board to issue up to $1 billion in loan guarantees to steel companies facing severe financial distress due to import competition; sets the terms and sunset for the program
• Pub. L. 106-51 also contains the companion Emergency Oil and Gas Guaranteed Loan Program authority, creating parallel boards and guarantee authority for oil and gas producers
• 13 CFR Part 400 — Regulations governing the Emergency Steel Guarantee Loan Program; establishes the Board, eligibility standards, guarantee limits (up to 85% of principal), application procedures, and program terms
• 13 CFR Part 500 — Regulations governing the Emergency Oil and Gas Guaranteed Loan Program; parallel structure to Part 400 for oil and gas borrowers

Key Mechanics

Both programs used the same structure: an Emergency Loan Guarantee Board (separate for steel and oil & gas) reviewed applications from financially distressed domestic producers, could approve federal guarantees covering up to 85% of private loan principal, and required borrowers to demonstrate that the loan would help them achieve long-term viability rather than merely delay failure. Guarantee applicants had to show that their distress was attributable to import competition (steel) or market price collapse (oil & gas) and that private credit was unavailable without the federal backstop. Both programs have expired and issued no new guarantees since the early 2000s; the regulations remain in effect to govern any residual obligations on previously issued guarantees.

Current Rule (2026)

What This Rule Does

The Emergency Steel Guarantee Loan Program was created in 1999 when a surge of low-cost imported steel — particularly from Asia during the 1997-1998 financial crisis — drove domestic steel prices down sharply, threatening the viability of U.S. steel manufacturers that had invested heavily in modernization and compliance with environmental regulations. Congress authorized up to $1 billion in total loan guarantees to "Qualified Steel Companies" that could demonstrate credit was not otherwise available to them on reasonable terms. The Emergency Oil and Gas Guaranteed Loan Program followed in 2000, structured identically, to assist smaller domestic oil and gas producers squeezed by the 1998-1999 oil price collapse to below $12/barrel.

Both programs were administered by an interagency Board with identical composition: the Chairman of the Board of Governors of the Federal Reserve System (serving as Board Chair), the Chairman of the Securities and Exchange Commission, and the Secretary of Commerce. The Department of Commerce hosted the Board's offices and staff. This unusual governance structure — placing a Fed chair at the head of a Commerce Department-housed program — reflected congressional intent to ensure sophisticated credit analysis drove guarantee decisions, not political considerations. The Board's decisions required a majority vote; no individual member could approve a guarantee unilaterally.

The programs operated as partial guarantees, not full backstops. The Board could guarantee up to 85% of the principal on a single loan, leaving the lending institution at risk for 15%. This co-risk requirement was deliberately designed to ensure the private lender retained incentive to assess the borrower's creditworthiness seriously — the guarantee made lending possible in distressed conditions, but did not eliminate lender discipline. The maximum guarantee per company was $250 million, with a further sublimit of $30 million for small steel businesses within the aggregate program cap.

Key Provisions — Emergency Steel (13 CFR Part 400)

• § 400.200 — Eligible Borrower: must be a "Qualified Steel Company" — a company that produces steel in the United States and can demonstrate that credit is not available on reasonable terms without the guarantee; the applicant must show it is likely to achieve financial viability if the loan is made; the Board applied a forward-looking viability test to prevent the guarantee from simply extending the life of companies that could not succeed even with rescue financing
• § 400.201 — Eligible Lender: must be a banking institution (commercial bank, trust company) regulated by a federal banking agency or an investment institution (broker-dealer, insurance company, investment bank) subject to state or federal regulation; the lender co-risk requirement was fundamental — lenders providing 100% of proceeds but guaranteed only 85% had to conduct independent creditworthiness analysis
• § 400.202 — Loan amount: aggregate guaranteed principal to a single Qualified Steel Company may not exceed $250 million; of the total program guarantees outstanding at any time, not more than $30 million shall be to small steel businesses
• § 400.203 — Guarantee percentage: the Board guarantee may not exceed 85% of the principal of a loan; the borrower's lender bears the remaining 15% risk; third parties (state governments, private guarantors) may guarantee part of the unguaranteed portion, but the federal guarantee is capped at 85%
• § 400.204 — Loan terms: all guaranteed loans were due and payable in full by December 31, 2005; this hard sunset date was written into the regulation, making the program explicitly temporary and time-limited; the Board determined what interest rate was "reasonable" for each guaranteed loan
• § 400.205 — Application process: applications (original + 3 copies) were due at the Board's Washington offices by August 31, 2001; the application required detailed financial information about the borrower, the proposed loan structure, and evidence that credit was unavailable on reasonable terms; the hard deadline created urgency for eligible steel companies to apply
• § 400.207 — Application evaluation: the Board first screened for eligibility (lender and borrower qualification), then evaluated the merits: likelihood of financial viability, adequacy of collateral, reasonableness of interest rate, and the probability that the guarantee would result in the company's continued operation; the Board could approve, condition, or reject applications and could request additional information at any time
• § 400.208 — Issuance of the Guarantee: Board approval was conditioned on the lender and borrower obtaining all required regulatory or judicial approvals, remaining legally authorized to complete the transaction, and executing loan documents satisfactory to the Board; the guarantee itself was a standardized form adopted by the Board
• § 400.106 — Ex parte communications: prohibited during pending proceedings — no oral or written communication between Board members and interested parties about the substance of a pending application; this administrative procedure protection prevented lobbying of Board members and ensured decisions turned on the administrative record
• § 400.108 — Restrictions on lobbying: funds received through a guaranteed loan could not be used to pay persons for influencing federal contracts, grants, or cooperative agreements — the anti-lobbying condition applied to all federal financial assistance

Key Provisions — Emergency Oil and Gas (13 CFR Part 500)

The Oil and Gas program (Part 500) was structurally identical to the Steel program (Part 400), with the same Board composition, 85% guarantee cap, application procedures, and December 31, 2005 loan maturity deadline. Key differences:

• The eligible borrower class was domestic oil and gas producers (rather than steel companies); applicants had to demonstrate they produced domestic oil or natural gas and faced similar credit unavailability
• The authorized program was designed for smaller independent producers — the companies most affected by the 1998-1999 price collapse were not the major integrated oil companies (which had capital markets access regardless of oil prices) but independent drillers and producers with production in already-developed fields
• The statutory authority was Title XIV of the Consolidated Appropriations Act 2001, not a standalone act like the Steel program's Pub. L. 106-51

How It Affects You

If you study federal industrial policy: The Steel and Oil & Gas guarantee programs are historical case studies in sector-specific emergency lending — the federal government's tool of last resort when credit markets fail an important domestic industry. The programs were designed with deliberate constraints (85% cap, lender co-risk, hard expiration date, viability test) that distinguished them from open-ended bailouts. They are less sweeping than the 2008-2009 TARP (which used equity purchases and provided more flexible support) and more targeted than the SBA's general small business loan guarantee programs. The interagency Board structure — Fed chair + SEC chair + Commerce Secretary — represented an unusual attempt to put financial expertise in charge of what might otherwise have been a politically driven process.

If you are researching loan guarantee program design: Parts 400 and 500 provide a detailed template for how federal emergency guarantee programs can be structured: eligibility criteria that test for genuine credit unavailability (not just preference for cheaper government-backed financing), co-risk requirements that maintain lender discipline, and hard expiration dates that prevent temporary programs from becoming permanent entitlements. The viability test (§ 400.207) — requiring the Board to assess whether the company was "likely to achieve financial viability" — is a key design feature that filtered out companies seeking to delay inevitable failure.

If you are a creditor with existing exposure to these programs: All guaranteed loans under both programs were due December 31, 2005; any loan that has not been repaid would have triggered the guarantee by now. The Board's residual obligations — including any pending claims from lenders whose loans defaulted — would still be administered under these regulations, which remain technically in force for that purpose.

Statutory Authority

This rule implements:

• Emergency Steel Loan Guarantee Act of 1999, Pub. L. 106-51 — authorized up to $1 billion in loan guarantees to qualified domestic steel companies; established the Emergency Steel Guarantee Loan Board; delegated authority to the Board to prescribe eligibility criteria, guarantee terms, and application procedures
• Title XIV of the Consolidated Appropriations Act 2001, Pub. L. 106-554 — created the identical Emergency Oil and Gas Guaranteed Loan Program with parallel structure and delegation to an Emergency Oil and Gas Guaranteed Loan Board

Recent Rulemakings

Both programs' application deadlines and loan maturity dates passed in 2001 and 2005 respectively. No major amendments have been made since 2001. The regulations remain in the CFR as the legal framework for any residual claims or obligations arising from guarantees issued before the programs closed.

Pending Action