To promote international monetary stability and to share seigniorage with officially dollarized countries.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``International Monetary Stability Act 
of 2001''.

SEC. 2. FINDINGS; STATEMENT OF POLICY.

    (a) Findings.--Congress finds that--
            (1) monetary stability is necessary for strong long-term 
        economic growth and higher standards of living;
            (2) many emerging market countries lack monetary stability 
        and have therefore suffered economic and financial problems 
        that reduce their economic growth and living standards, 
        including currency crises, financial fragility, inflation 
        expectations that are built into labor markets, and high and 
        volatile inflation rates and interest rates;
            (3) there has been growing international interest in 
        official dollarization, whereby a country substantially or 
        totally eliminates its domestic currency and adopts the United 
        States dollar as legal tender;
            (4) official dollarization enables a country to import 
        monetary stability, thereby bringing inflation and interest 
        rates down toward the levels of the United States;
            (5) greater monetary stability helps increase long-term 
        economic growth and raise living standards in emerging market 
        countries;
            (6) by increasing trade and investment flows and decreasing 
        the need for foreign assistance, greater economic growth and 
        higher living standards abroad would serve the interests of the 
        United States;
            (7) countries that become officially dollarized lose 
        seigniorage (the profit from issuing a currency), and this is a 
        significant barrier to official dollarization;
            (8) official dollarization would increase the seigniorage 
        earnings of the United States;
            (9) it would be mutually beneficial for the United States 
        to encourage official dollarization by offering to share with 
        countries that become officially dollarized a portion of the 
        extra seigniorage earnings that the United States would earn; 
        and
            (10) encouraging official dollarization complements ongoing 
        efforts by the United States to strengthen the international 
        financial architecture.
    (b) Statement of Policy.--It is the policy of the United States 
that--
            (1) the Federal Reserve System has no obligation to act as 
        a lender of last resort to the financial systems of dollarized 
        countries;
            (2) the Federal Reserve System has no obligation to 
        consider the economic conditions of dollarized countries when 
        formulating or implementing monetary policy;
            (3) the supervision of financial institutions in dollarized 
        countries remains the responsibility of those countries; and
            (4) in the absence of qualification by the Secretary of the 
        Treasury under section 3, countries are free to dollarize 
        unilaterally.

SEC. 3. QUALIFICATION.

    (a) In General.--The Secretary of the Treasury (in this Act 
referred to as the ``Secretary'') may qualify a country as officially 
dollarized for purposes of this Act, after consideration of whether the 
country has--
            (1) ceased issuing a local paper currency;
            (2) extinguished a substantial portion of the domestic 
        currency in circulation, with plans to extinguish as much of 
        that currency as feasible;
            (3) granted legal tender status to the United States 
        dollar; and
            (4) substantially redenominated its prices, assets, and 
        liabilities in United States dollars;
    (b) Other Considerations.--In deciding whether to qualify a country 
as officially dollarized under this section, the Secretary may consider 
any additional factors the Secretary deems relevant.
    (c) Statement by Secretary.--The Secretary shall issue a written 
statement on qualification of a country under this section that 
explains why the country has been qualified.
    (d) Limitation.--The Secretary may not qualify a United States 
territory or commonwealth as officially dollarized for purposes of this 
Act.

SEC. 4. PAYMENTS.

    (a) In General.--Beginning with the 1st business day of the 4th 
full calendar month after the date a country is qualified under section 
3, the Secretary shall, every 3 months, pay the government of the 
country an amount equal to 21.25 percent of D, multiplied by I, 
multiplied by P2, divided by P1.
    (b) Definitions.--In subsection (a):
            (1) D.--The term ``D'' means the lesser of--
                    (A) the dollar amount of Federal reserve notes the 
                country acquired from the Federal Reserve System for 
                purposes of official dollarization under this Act; or
                    (B) the dollar value of the domestic currency of 
                the country in circulation in the country before the 
                country was qualified.
            (2) I.--The term ``I'' means the average yield to maturity 
        on 90-day Treasury bills in the most recent 3 calendar month 
        period occurring before the date of payment under subsection 
        (a), except that if a 90-day Treasury bill is not issued during 
        the 3-month period, the Secretary may substitute an appropriate 
        alternative interest rate.
            (3) P1.--The term ```P1'' means the nonseasonally adjusted 
        United States City Average All Items Consumer Price Index for 
        All Urban Consumers for the month falling three months before 
        the most recent month occurring before the date of payment 
        under subsection (a) for which data are available, except that 
        if the price measure is discontinued or, in the judgment of the 
        Secretary, altered in a manner that is materially adverse to 
        the interests of the United States, the Secretary may, after 
        consultation with the Bureau of Labor Statistics, substitute an 
        appropriate alternative index.
            (4) P2.--The term ``P2'' means the nonseasonally adjusted 
        United States City Average All Items Consumer Price Index for 
        All Urban Consumers for the most recent month occurring before 
        the date of payment under subsection (a) for which data are 
        available, except that if the price measure is discontinued or, 
        in the judgment of the Secretary, altered in a manner that is 
        materially adverse to the interests of the United States, the 
        Secretary may, after consultation with the Bureau of Labor 
        Statistics, substitute an appropriate alternative index.

SEC. 5. PREVIOUSLY DOLLARIZED COUNTRIES.

    (a) Limitation.--The Secretary of the Treasury may not make a 
payment under section 3 to the British Virgin Islands, East Timor, the 
Republic of El Salvador, the Republic of the Marshall Islands, the 
Federated States of Micronesia, the Republic of Palau, the Republic of 
Panama, or the Turks and Caicos Islands until 10 percent of the 
payments made countries not specified in this subsection equals or 
exceeds the total of the payments that would be made in accordance with 
subsection (b) of this section to the countries specified in this 
subsection on qualification of the countries.
    (b) Payment Calculation.--On qualification under section 3 of a 
country specified in subsection (a) of this section, the Secretary of 
the Treasury shall make payments to the country pursuant to section 4, 
except that in applying section 4, the term ``D'' means an amount equal 
to 4 percent of the nominal dollar gross domestic product for the 
country, as calculated by the International Bank for Reconstruction and 
Development (or other recognized statistical authority), as of June 1, 
2001, for calendar year 1999.

SEC. 6. DISQUALIFICATION AND PAYMENT CANCELLATION.

    (a) Limitation.--The Secretary shall disqualify, and cease making 
payments to, a country under this Act if--
            (1) the United States declares war on the country; or
            (2) the Secretary determines that the country is no longer 
        officially dollarized in accordance with this Act, and issues a 
        written public statement to that effect that lists the reasons 
        for the determination.
    (b) Considerations.--In making a determination under this section, 
the Secretary shall consider the factors listed in section 3(a) and any 
additional factors that the Secretary deems relevant.

SEC. 7. REGULATIONS.

    The Secretary may issue such regulations as are appropriate to 
carry out this Act.

SEC. 8. EXPENSES.

    The amounts in the stabilization fund established by section 5302 
of title 31, United States Code, (or, if the amounts in the 
stabilization fund are not sufficient, the amounts deposited in the 
surplus funds of the Federal Reserve Banks in accordance with section 
7(a)(2) of the Federal Reserve Act) shall be available to cover the 
expenses and payments under this Act.

Summary: International Monetary Stability Act of 2001 - Authorizes the Secretary of the Treasury to qualify a country as officially dollarized , after consideration of whether the country has taken specified actions with respect to its currency. Directs the Secretary, upon qualification of a country, to pay to the government of such country, every three months, an amount determined according to a specified formula. Prohibits the Secretary from making payment to previously dollarized British Virgin Islands, East Timor, the Republic of El Salvador, the Republic of the Marshall Islands, the Federated States of Micronesia, the Republic of Palau, the Republic of Panama, or the Turks and Caicos Islands, until specified conditions are met.