I

106TH CONGRESS

1ST SESSION H. R. 1452

To create United States money in the form of noninterest bearing credit

in accordance with the 1st and 5th clauses of section 8 of Article

I of the Constitution of the United States, to provide for noninterest

bearing loans of the money so created to State and local governments

solely for the purpose of funding capital projects.

IN THE HOUSE OF REPRESENTATIVES

APRIL 15, 1999

Mr. LAHOOD introduced the following bill; which was referred to the Committee on Banking and Financial Services, and in addition to the Committee on the Budget, 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 create United States money in the form of noninterest

bearing credit in accordance with the 1st and 5th clauses

of section 8 of Article I of the Constitution of the United

States, to provide for noninterest bearing loans of the

money so created to State and local governments solely

for the purpose of funding capital projects.

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

2 This Act may be cited as the ‘‘State and Local Gov3 ernment Economic Empowerment Act’’.

4 SEC. 2. FINDINGS.

5 The Congress hereby finds the following:

6 (1) As of the date of the enactment of this Act,

7 money is principally created in the domestic econ8 omy by banks through the process known as ‘‘de9 posit expansion’’ under which credit is extended by

10 banks to customers in exchange for the assumption

11 of an obligation by each customer to repay the

12 amount of any such credit with interest.

13 (2) The creation of money through the exten14 sion of credit and creation of debt, a traditional

15 banking function, preceded the establishment by the

16 Congress of, first, the national banking system and,

17 subsequently, the Federal Reserve System.

18 (3) The constitutional authority to create and

19 regulate money does not limit the Federal Govern20 ment to creating money through the production of

21 coins or currency or the process of debt creation but,

22 except for a brief period during the administration

23 of President Lincoln, the Federal Government has

24 not exercised such authority more broadly.

25 (4) The creation of money by the banks in con26 junction with the Federal reserve banks does not
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1 limit the constitutional authority of the Congress to

2 create Government credit funds in the form of non3 interest bearing credit to fund a legislatively ap4 proved program or prevent the Congress from cre5 ating such funds.

6 (5) The creation of noninterest-bearing govern7 ment credit funds in measured or limited increments

8 for the purpose of funding capital and environmental

9 projects in the public interest—

(A) will allow projects to be built for 1 10 ⁄2 to

1 11 ⁄3 the normal cost; and

12 (B) will allow more necessary projects to

13 be built at a lower cost to the taxpayers and at

14 the same time build additional wealth in the

15 communities where such projects are located.

16 SEC. 3. CREATION OF MONEY.

17 (a) IN GENERAL.—Pursuant to the exercise by the

18 Congress of the authority contained in the 5th clause of

19 section 8 of Article I of the Constitution, the Secretary

20 of the Treasury shall have money available for purposes

21 of this Act in an amount equal to the product of—

22 (1) the population of the United States, as de23 termined by the Secretary of Commerce on the basis

24 of the 1990 census; and

25 (2) $1,400.
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1 (b) LOAN AGREEMENT.—The money referred to in

2 section 3(a) shall be created by having the Secretary of

3 the Treasury and the Board of Governors of the Federal

4 Reserve System enter into a Loan Agreement in accord5 ance with the following requirements:

6 (1) The Board shall lend the United States

7 Treasury an amount up to a total of

8 $360,000,000,000 at the rate of not more than

9 $72,000,000,000 per annum (on a cumulative basis)

10 in each of the 5 years commencing 60 days after the

11 date of the enactment of this Act.

12 (2) The Secretary of the Treasury shall pay an

13 annual fee to the Board (the amount to be nego14 tiated between the Secretary and the Board) to

15 cover the administrative costs the Board incurs in

16 acting as the agent of the Administrator appointed

17 under section 4(b). The amount of this administra18 tion fee each year shall be charged to the recipients

19 of the noninterest bearing loans made to them dur20 ing the year pursuant to section 7(e), pro rata to the

21 amount of such loans.

22 (c) EXERCISE OF SOVEREIGN CAPACITY TO CREATE

23 MONEY.—

24 (1) IN GENERAL.—Any amount made available

25 pursuant to this Act shall be treated as money cre-
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1 ated in the sovereign and exclusive capacity of the

2 United States, in accordance with the Constitution,

3 to create money.

4 (2) EXPENDITURE OF TAX REVENUE OR BOR5 ROWED FUNDS NOT AUTHORIZED.—No provision of

6 this Act shall be construed as authorizing the ex7 penditure of funds derived from revenues imposed

8 and collected by the United States Government

9 under any provision of law or from amounts bor10 rowed by the United States Government pursuant to

11 chapter 31 of title 31, United States Code, or any

12 other provision of law.

13 (d) BUDGET TREATMENT.—

14 (1) NONAPPLICABILITY OF PROVISIONS APPLI15 CABLE TO RECEIPT AND EXPENDITURES OF REV16 ENUE AND BORROWED FUNDS.—For purposes of

17 title 31, United States Code, the Congressional

18 Budget and Impoundment Control Act of 1974, the

19 Balanced Budget and Emergency Deficit Control

20 Act of 1985, the Budget Enforcement Act of 1990,

21 or any other provision of law—

22 (A) money created under this section shall

23 not be treated as revenue when it is created or

24 made available to the Administrator under sec25 tion 4(b) nor shall it be treated as revenue by
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1 the Administrator or by the Secretary of the

2 Treasury when the loans referred to in section

3 6 are repaid;

4 (B) the money created under this section

5 and the interest-free loan program established

6 under section 6—

7 (i) shall not be treated as budget au8 thority, new budget authority, budgetary

9 resources, spending authority, new spend10 ing authority, entitlement authority, or

11 credit authority;

12 (ii) shall not be subject to apportion13 ment or sequestration other than in ac14 cordance with the provisions of sections 4,

15 5, and 6; and

16 (iii) shall not be taken into account in

17 the determination of the baseline for any

18 fiscal year; and

19 (C) the disbursement of money created

20 under this section shall not be treated as an

21 outlay or a budget outlay.

22 (e) BANK RESERVE REQUIREMENTS.—No provision

23 of this Act shall be construed as affecting any authority

24 of the Board to adjust bank reserve requirements, as ap25 propriate.
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1 SEC. 4. ADMINISTRATION OF THE ACT.

2 (a) IN GENERAL.—The Administrator of this Act

3 shall be under the Department of the Treasury.

4 (b) MANAGEMENT.—An Administrator shall be ap5 pointed by, and accountable to, the Secretary of the Treas6 ury.

7 (c) DUTIES OF ADMINISTRATOR.—

8 (1) IN GENERAL.—The Administrator shall be

9 solely responsible for disbursing, pursuant to section

10 6, funds created under this Act and otherwise car11 rying out the duties imposed under this Act.

12 (2) APPOINTMENT OF AGENT.—The Adminis13 trator may appoint the Board or any Federal reserve

14 bank as an agent of the Administrator to perform

15 such duties of the Administrator under this Act that

16 the Administrator sees fit to delegate to the Board

17 or any such bank.

18 (d) UNITED STATES GOVERNMENT GENERAL

19 CHECKING ACCOUNT.—

20 (1) DEPOSIT.—Checks drawn on the money

21 created under section 3 shall be deposited to the

22 credit of the United States Government in a United

23 States Government general checking account at a

24 Federal reserve bank.

25 (2) DISBURSEMENTS FROM ACCOUNT.—All dis26 bursements of loans under section 6 shall be made
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1 with United States Government checks from the ac2 count referred to in paragraph (1).

3 (e) LOAN REPAYMENT ACCOUNT.—The Adminis4 trator shall establish and maintain a separate checking ac5 count in a Federal reserve bank for the deposit of any

6 repayment of principal on loans made under section 6.

7 SEC. 5. ELIGIBILITY OF STATE AND LOCAL GOVERNMENTS

8 FOR INTEREST-FREE LOANS.

9 (a) IN GENERAL.—Subject to subsection (b), each

10 State, county, township, incorporated municipality, school

11 district, and Indian tribe shall be entitled to obtain a loan

12 from the Administrator in accordance with section 6, un13 less such unit of government is delinquent in repaying a

14 prior loan.

15 (b) MAXIMUM AMOUNT LIMITATION.—The total

16 amount of money to which any entity described in sub17 section (a) is eligible to borrow under this section shall

18 not exceed the amount equal to the product of—

19 (1) the resident population, as determined by

20 the Secretary of Commerce on the basis of the 1990

21 census, of the geographic territory over which the

22 entity has jurisdiction (or, in the case of a school

23 district, the latest official enrollment figures as re24 ported to the State in which the school district re25 sides); and
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1 (2) the amount equal to—

2 (A) in the case of a State, $200;

3 (B) in the case of a county (as defined in

4 section 2 of title 1, United States Code), $100;

5 if the State has no township form of govern6 ment, this amount shall be $200;

7 (C) in the case of an incorporated munici8 pality, $600;

9 (D) in the case of any township, $100;

10 (E) in the case of any school district,

11 $2,400; and

12 (F) in the case of an Indian tribe, $1,000.

13 SEC. 6. ISSUANCE OF INTEREST-FREE LOANS.

14 Subject to sections 5(b) and 7, the Administrator

15 shall issue an interest-free loan from the money created

16 under section 3 to any government unit described in sec17 tion 5(a) if the Administrator obtains such assurances as

18 the Administrator determines to be appropriate from the

19 unit that—

20 (1) the proceeds of such loan will be used solely

21 for the purpose of—

22 (A) funding capital projects of the govern23 mental unit, including the construction of or

24 improvements to—

25 (i) school facilities;
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1 (ii) streets, highways, bridges, and

2 tunnels;

3 (iii) water and sewer systems;

4 (iv) waste disposal systems;

5 (v) public housing facilities;

6 (vi) public buildings and other public

7 facilities; and

8 (vii) environmental facilities; or

9 (B) the cleanup of toxic waste sites or

10 other environmental improvements.

11 SEC. 7. ADMINISTRATIVE PROVISIONS.

12 (a) DISBURSEMENT REQUIREMENTS.—Loans made

13 under section 6 shall be disbursed by the Administrator—

14 (1) in a lump sum for the full amount of the

15 loan; or

16 (2) if the Administrator determines that partial

17 disbursements are appropriate in the case of loans

18 for construction projects in order to accommodate a

19 greater number of loan requests, over the construc20 tion period of the project.

21 (b) MINIMUM PHASE-IN PERIOD.—Disbursements on

22 all eligible loans approved under section 6 shall begin be23 fore the end of the 5-year period beginning on the date

24 of the enactment of this Act.
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1 (c) PERIOD TO MATURITY.—The period to maturity

2 of any loan made under section 6 shall be the estimated

3 number of years of the useful life of the infrastructure

4 installation (if any) which is financed by the loan, but,

5 in any case, shall be a minimum of 10 years and a max6 imum of 30 years.

7 (d) APPLICABILITY OF STATE LAW.—The number or

8 the principal amounts of interest-free loans made under

9 section 6 to any governmental unit established by a State,

10 or the period to maturity of any such loan, may not exceed

11 the maximum number, amount, or period to maturity es12 tablished under the law of such State, unless the State

13 provides a waiver from any such limitation with respect

14 to any such governmental unit.

15 (e) ADMINISTRATIVE FEES.—The Administrator

16 shall impose an administrative fee on each recipient of a

17 loan under section 6 in an amount not to exceed the lesser

18 of—

19 (1) 0.25 percent of the total amount of the

20 loan; or

21 (2) the amount sufficient to cover all adminis22 trative costs incurred by the Administrator, includ23 ing overhead, for making and administering that

24 particular loan.
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1 (f) TERMS OF REPAYMENT.—The repayment terms

2 of any loan under section 6 shall require quarterly pay3 ments by the recipient in equal amounts determined by

4 dividing—

5 (1) the sum of the principal and the adminis6 trative fees applicable with respect to such loan; by

7 (2) the number of calendar quarters any por8 tion of which falls within the period to maturity of

9 the loan.

10 (g) COLLECTIONS OF PAST DUE AMOUNTS AND COL11 LECTION FEES.—

12 (1) ENFORCED COLLECTIONS.—The Adminis13 trator shall take action to enforce collection of past

14 due amounts of any loan on which 4 or more quar15 terly payments are due and payable.

16 (2) IMPOUNDMENT OF DELINQUENT

17 AMOUNT.—In the case of any delinquent loan de18 scribed in paragraph (1), the Administrator may

19 seek an order from any district court of the United

20 States of appropriate jurisdiction directing a United

21 States marshall to impound, under authority of this

22 section, any available funds of the debtor in an

23 amount equal to the amount currently due as of the

24 date of such action to reduce or eliminate the delin25 quency.
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1 (3) WAIVER OF DEBTOR’S RIGHT TO DEFEND

2 AGAINST COLLECTION.—As a condition for receiving

3 any loan under section 6, the recipient shall waive

4 any right to take any legal action to prevent or de5 fend against the collection by the Administrator of

6 any amount which the parties agree is past due.

7 (4) COST OF COLLECTION.—The costs incurred

8 by the Administrator in collecting any amount under

9 this subsection with respect to any loan shall be

10 added to and treated as a part of the principal

11 amount of the loan.

12 (5) BALANCE OF LOAN PRINCIPAL AND FEES

13 PAYABLE IN ACCORDANCE WITH TERMS OF LOAN.—

14 A debtor who is subject to collection proceedings

15 under this subsection for any delinquent portion of

16 a loan under section 6 shall continue to meet the re17 payment schedule applicable to such loan for the re18 maining amount of principal and fees.

19 SEC. 8. DISPOSITION OF FUNDS UPON REPAYMENT.

20 The Administrator shall, at such times and in such

21 amounts as the Administrator determines to be appro22 priate, transfer amounts in the loan repayment account

23 referred to in section 4(e) hereof to the United States Gov24 ernment general checking account referred to in section

25 4(d)(1).
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1 SEC. 9. DEFINITIONS.

2 For purposes of this Act, the following definitions

3 shall apply:

4 (1) ADMINISTRATOR.—The term ‘‘Adminis5 trator’’ means the Administrator appointed by the

6 Secretary of the Treasury.

7 (2) BOARD.—The term ‘‘Board’’ means the

8 Board of Governors of the Federal Reserve System.

9 (3) INDIAN TRIBE.—The term ‘‘Indian tribe’’

10 means any Indian tribe, band, pueblo, nation, or

11 other organized group or community, including any

12 Alaska Native village or regional or village corpora13 tion as defined in or established pursuant to the

14 Alaska Native Claims Settlement Act, which is rec15 ognized as eligible for the special programs and serv16 ices provided by the United States to Indians be17 cause of their status as Indians.

18 (4) SECRETARY.—Except when used in connec19 tion with a reference to the Secretary of Commerce,

20 the term ‘‘Secretary’’ means the Secretary of the

21 Treasury.

22 (5) STATE.—The term ‘‘State’’ includes the

23 District of Columbia, the Commonwealth of Puerto

24 Rico, Guam, American Samoa, the United States

25 Virgin Islands, and the Northern Mariana Islands.

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