HR 2551 IHCommentsClose CommentsPermalink

To amend the Federal Reserve Act to provide for lending authority for certain securities purchases, and for other purposes.CommentsClose CommentsPermalink

May 21, 2009CommentsClose CommentsPermalink

Mr. FOSTER (for himself, Mr. KANJORSKI, Ms. WATERS, Mr. FRANK of Massachusetts, Mr. CLEAVER, Mr. BACA, Mr. MORAN of Virginia, Mr. ANDREWS, and Mr. CONNOLLY of Virginia) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concernedCommentsClose CommentsPermalink

To amend the Federal Reserve Act to provide for lending authority for certain securities purchases, and for other purposes.CommentsClose CommentsPermalink

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

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Municipal Market Liquidity Enhancement Act of 2009’.CommentsClose CommentsPermalink

SEC. 2. FEDERAL RESERVE LENDING AUTHORITY FOR CERTAIN SECURITIES PURCHASES.

Section 13 of the Federal Reserve Act (12 U.S.C. 342) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





‘(15) LENDING AUTHORITY FOR CERTAIN SECURITIES PURCHASES-CommentsClose CommentsPermalink





‘(A) IN GENERAL- In unusual and exigent circumstances, the Board, by the affirmative vote of not less than five members, and subject to such limitations, restrictions, and regulations as the Board may prescribe, may authorize any Federal reserve bank to make advances to a special purpose vehicle or a designated corporate entity on the promissory notes of such special purpose vehicle or designated corporate entity secured to the satisfaction of such Federal reserve bank by the securities described in subparagraph (B) or by other forms of security.CommentsClose CommentsPermalink





‘(B) RESTRICTIONS ON USE OF ADVANCES- Such advances authorized by this paragraph shall--CommentsClose CommentsPermalink





‘(i) be used solely to finance the purchase by such special purpose vehicle or designated corporate entity of----CommentsClose CommentsPermalink





‘(I) variable rate demand obligations issued prior to the date of the enactment of this paragraph by a municipal securities issuer,CommentsClose CommentsPermalink





‘(II) variable rate demand obligations issued to refund variable rate demand obligations issued prior to the date of the enactment of this paragraph,CommentsClose CommentsPermalink





‘(III) variable rate demand obligations issued to refinance auction rate securities, orCommentsClose CommentsPermalink





‘(IV) short-term notes used for cash-management and other short-term borrowing needs, as determined by the Board, issued by a municipal securities issuer,CommentsClose CommentsPermalink





where such purchase is made under an agreement between the special purpose vehicle or designated corporate entity and the obligation or note issuer whereby the special purpose vehicle or designated corporate entity agrees to purchase obligations or notes that are made publicly available for purchase, but are not otherwise purchased; andCommentsClose CommentsPermalink





‘(ii) bear interest at rates fixed from time to time by the Federal reserve bank, subject to the review and determination of the Board.CommentsClose CommentsPermalink





‘(C) COOPERATION NOT PROHIBITED- Nothing shall prohibit a Federal reserve bank from cooperating with the Department of the Treasury or other Government agency or department in making such advances authorized by this paragraph.CommentsClose CommentsPermalink





‘(D) NOT TO BE CONSTRUED AS A LIMITATION- Nothing in this paragraph shall be construed to limit the authority of the Federal reserve banks or the Board under other paragraphs of this section.CommentsClose CommentsPermalink





‘(E) MUNICIPAL SECURITY ISSUER DEFINED- For purposes of this paragraph, the term ‘municipal security issuer’ means any entity that has the ability to issue a bond treated as a ‘State or local bond’ (as such term is defined in section 103(c) of the Internal Revenue Code of 1986 and the regulations issued thereunder).’.CommentsClose CommentsPermalink

SEC. 3. AUTHORITY UNDER THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008.

Section 101 of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5211) is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





‘(f) Clarification of Authority Regarding Municipal Securities-CommentsClose CommentsPermalink





‘(1) CLARIFICATION- The authority of the Secretary to take any action under this title includes the authority to provide credit enhancement in connection with municipal securities whose purchase is financed under any facility designed to enhance liquidity in the municipal market that is provided by the Board or any Federal reserve bank.CommentsClose CommentsPermalink





‘(2) WAIVER OF CERTAIN PROVISIONS- In connection with providing any credit enhancement described in paragraph (1)--CommentsClose CommentsPermalink





‘(A) the Secretary shall not be required to apply the provisions of section 102; andCommentsClose CommentsPermalink





‘(B) the Secretary shall not be required to consider the total dollar amount of securities subject to such credit enhancements as outstanding for purposes of authorization to purchase limitations under section 115.CommentsClose CommentsPermalink





‘(3) DEFINITION- For purposes of this subsection, the term ‘municipal security’ means any bond treated as a ‘State or local bond’ (as such term is defined in section 103(c) of the Internal Revenue Code of 1986 and the regulations issued thereunder).’.CommentsClose CommentsPermalink

SEC. 4. CERTAIN FEDERAL RESERVE LENDING AUTHORITY NOT TREATED AS FEDERAL GUARANTEE UNDER TAX EXEMPT BOND REQUIREMENTS.

Subparagraph (A) of section 149(b)(3) of the Internal Revenue Code of 1986 is amended by striking ‘or’ at the end of clause (ii), by striking the period at the end of clause (iii) and inserting ‘, or’, and by adding at the end the following new clause:CommentsClose CommentsPermalink





‘(iv) any advances made by a Federal reserve bank pursuant to section 13(15) of the Federal Reserve Act (12 U.S.C. 342(15)).’.CommentsClose CommentsPermalink