I 

111TH CONGRESS 

1ST SESSION H. R. 2551 

To amend the Federal Reserve Act to provide for lending authority for 

certain securities purchases, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 21, 2009 

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 concerned 

A BILL 

To amend the Federal Reserve Act to provide for lending 

authority for certain securities purchases, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Municipal Market Li5 quidity Enhancement Act of 2009’’. 


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1 SEC. 2. FEDERAL RESERVE LENDING AUTHORITY FOR CER2 TAIN SECURITIES PURCHASES. 

3 Section 13 of the Federal Reserve Act (12 U.S.C. 

4 342) is amended by adding at the end the following new 

5 paragraph: 

6 ‘‘(15) LENDING AUTHORITY FOR CERTAIN SE7 CURITIES PURCHASES.— 

8 ‘‘(A) IN GENERAL.—In unusual and exi9 gent circumstances, the Board, by the affirma10 tive vote of not less than five members, and 

11 subject to such limitations, restrictions, and 

12 regulations as the Board may prescribe, may 

13 authorize any Federal reserve bank to make ad14 vances to a special purpose vehicle or a des15 ignated corporate entity on the promissory 

16 notes of such special purpose vehicle or des17 ignated corporate entity secured to the satisfac18 tion of such Federal reserve bank by the securi19 ties described in subparagraph (B) or by other 

20 forms of security. 

21 ‘‘(B) RESTRICTIONS ON USE OF AD22 VANCES.—Such advances authorized by this 

23 paragraph shall— 

24 ‘‘(i) be used solely to finance the pur25 chase by such special purpose vehicle or 

26 designated corporate entity of—— 


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1 ‘‘(I) variable rate demand obliga2 tions issued prior to the date of the 

3 enactment of this paragraph by a mu4 nicipal securities issuer, 

5 ‘‘(II) variable rate demand obli6 gations issued to refund variable rate 

7 demand obligations issued prior to the 

8 date of the enactment of this para9 graph, 

10 ‘‘(III) variable rate demand obli11 gations issued to refinance auction 

12 rate securities, or 

13 ‘‘(IV) short-term notes used for 

14 cash-management and other short15 term borrowing needs, as determined 

16 by the Board, issued by a municipal 

17 securities issuer, 

18 where such purchase is made under an 

19 agreement between the special purpose ve20 hicle or designated corporate entity and 

21 the obligation or note issuer whereby the 

22 special purpose vehicle or designated cor23 porate entity agrees to purchase obliga24 tions or notes that are made publicly availVerDate Nov 24 2008 17:25 May 24, 2009 Jkt 079200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2551.IH H2551

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1 able for purchase, but are not otherwise 

2 purchased; and 

3 ‘‘(ii) bear interest at rates fixed from 

4 time to time by the Federal reserve bank, 

5 subject to the review and determination of 

6 the Board. 

7 ‘‘(C) COOPERATION NOT PROHIBITED.— 

8 Nothing shall prohibit a Federal reserve bank 

9 from cooperating with the Department of the 

10 Treasury or other Government agency or de11 partment in making such advances authorized 

12 by this paragraph. 

13 ‘‘(D) NOT TO BE CONSTRUED AS A LIMITA14 TION.—Nothing in this paragraph shall be con15 strued to limit the authority of the Federal re16 serve banks or the Board under other para17 graphs of this section. 

18 ‘‘(E) MUNICIPAL SECURITY ISSUER DE19 FINED.—For purposes of this paragraph, the 

20 term ‘municipal security issuer’ means any enti21 ty that has the ability to issue a bond treated 

22 as a ‘State or local bond’ (as such term is de23 fined in section 103(c) of the Internal Revenue 

24 Code of 1986 and the regulations issued there25 under).’’. 


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1 SEC. 3. AUTHORITY UNDER THE EMERGENCY ECONOMIC 

2 STABILIZATION ACT OF 2008. 

3 Section 101 of the Emergency Economic Stabilization 

4 Act of 2008 (12 U.S.C. 5211) is amended by adding at 

5 the end the following new subsection: 

6 ‘‘(f) CLARIFICATION OF AUTHORITY REGARDING MU7 NICIPAL SECURITIES.— 

8 ‘‘(1) CLARIFICATION.—The authority of the 

9 Secretary to take any action under this title includes 

10 the authority to provide credit enhancement in con11 nection with municipal securities whose purchase is 

12 financed under any facility designed to enhance li13 quidity in the municipal market that is provided by 

14 the Board or any Federal reserve bank. 

15 ‘‘(2) WAIVER OF CERTAIN PROVISIONS.—In 

16 connection with providing any credit enhancement 

17 described in paragraph (1)— 

18 ‘‘(A) the Secretary shall not be required to 

19 apply the provisions of section 102; and 

20 ‘‘(B) the Secretary shall not be required to 

21 consider the total dollar amount of securities 

22 subject to such credit enhancements as out23 standing for purposes of authorization to pur24 chase limitations under section 115. 

25 ‘‘(3) DEFINITION.—For purposes of this sub26 section, the term ‘municipal security’ means any 


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1 bond treated as a ‘State or local bond’ (as such term 

2 is defined in section 103(c) of the Internal Revenue 

3 Code of 1986 and the regulations issued there4 under).’’. 

5 SEC. 4. CERTAIN FEDERAL RESERVE LENDING AUTHORITY 

6 NOT TREATED AS FEDERAL GUARANTEE 

7 UNDER TAX EXEMPT BOND REQUIREMENTS. 

8 Subparagraph (A) of section 149(b)(3) of the Inter9 nal Revenue Code of 1986 is amended by striking ‘‘or’’ 

10 at the end of clause (ii), by striking the period at the end 

11 of clause (iii) and inserting ‘‘, or’’, and by adding at the 

12 end the following new clause: 

13 ‘‘(iv) any advances made by a Federal 

14 reserve bank pursuant to section 13(15) of 

15 the Federal Reserve Act (12 U.S.C. 

16 342(15)).’’. 

Æ 


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