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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2551 Introduced in House (IH)]

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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Municipal Market Liquidity 
Enhancement Act of 2009''.

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:
            ``(15) Lending authority for certain securities 
        purchases.--
                    ``(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.
                    ``(B) Restrictions on use of advances.--Such 
                advances authorized by this paragraph shall--
                            ``(i) be used solely to finance the 
                        purchase by such special purpose vehicle or 
                        designated corporate entity of----
                                    ``(I) variable rate demand 
                                obligations issued prior to the date of 
                                the enactment of this paragraph by a 
                                municipal securities issuer,
                                    ``(II) variable rate demand 
                                obligations issued to refund variable 
                                rate demand obligations issued prior to 
                                the date of the enactment of this 
                                paragraph,
                                    ``(III) variable rate demand 
                                obligations issued to refinance auction 
                                rate securities, or
                                    ``(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,
                        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; and
                            ``(ii) bear interest at rates fixed from 
                        time to time by the Federal reserve bank, 
                        subject to the review and determination of the 
                        Board.
                    ``(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.
                    ``(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.
                    ``(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).''.

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:
    ``(f) Clarification of Authority Regarding Municipal Securities.--
            ``(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.
            ``(2) Waiver of certain provisions.--In connection with 
        providing any credit enhancement described in paragraph (1)--
                    ``(A) the Secretary shall not be required to apply 
                the provisions of section 102; and
                    ``(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.
            ``(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).''.

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:
                            ``(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)).''.
                                 <all>
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