II 

116TH CONGRESS 

1ST SESSION S. 2120 

To prohibit the provision of Federal funds to State and local governments 

for payment of obligations, to prohibit the Federal Reserve Banks, the 

Department of the Treasury, and other Federal agencies from financially 

assisting State and local governments that have defaulted on their obligations, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 15, 2019 

Mr. YOUNG (for himself, Mr. TOOMEY, and Mr. COTTON) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To prohibit the provision of Federal funds to State and 

local governments for payment of obligations, to prohibit 

the Federal Reserve Banks, the Department of the 

Treasury, and other Federal agencies from financially 

assisting State and local governments that have defaulted 

on their obligations, 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 ‘‘Government Bailout 

5 Prevention Act’’. 


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1 SEC. 2. DEFINITION. 

2 In this Act, the term ‘‘State’’ means— 

3 (1) any of the several States; 

4 (2) the District of Columbia; and 

5 (3) any territory or possession of the United 

6 States. 

7 SEC. 3. PROHIBITION ON THE USE OF FEDERAL FUNDS TO 

8 PAY OR GUARANTEE STATE AND LOCAL OBLI9 GATIONS. 

10 (a) IN GENERAL.—Notwithstanding any other provi11 sion of law, no Federal funds may be used to purchase 

12 or guarantee obligations of, issue lines of credit to, or pro13 vide direct or indirect grants-and-aid to, any State govern14 ment, municipal government, local government, or county 

15 government which, on or after January 1, 2019, has filed 

16 for bankruptcy, has defaulted on its obligations, is at risk 

17 of defaulting, or is likely to default, absent such assistance 

18 from the United States Government. 

19 (b) LIMIT ON USE OF BORROWED FUNDS.—The Sec20 retary of the Treasury shall not, directly or indirectly, use 

21 general fund revenues or funds borrowed pursuant to title 

22 31, United States Code, to purchase or guarantee any 

23 asset or obligation of any State government, municipal 

24 government, local government, or county government, or 

25 otherwise to assist such government entity, if, on or after 

26 January 1, 2019, that State government, municipal govVerDate Sep 11 2014 00:26 Jul 18, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2120.IS S2120

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1 ernment, or county government has defaulted on its obli2 gations, has filed for bankruptcy, is at risk of defaulting, 

3 or is likely to default, absent such assistance from the 

4 United States Government. 

5 (c) PROHIBITION ON FEDERAL RESERVE ASSIST6 ANCE.—Notwithstanding any other provision of law, no 

7 Federal Reserve Bank may provide or extend to, or au8 thorize with respect to, any State government, municipal 

9 government, local government, county government, or 

10 other entity that has taxing authority or bonding author11 ity, any funds, loan guarantees, credits, or any other fi12 nancial instrument, including the purchasing of the bonds 

13 of such State, municipality, locality, county, or other bond14 ing authority, or to otherwise assist such government enti15 ty under any authority of any Federal Reserve Bank. 

16 (d) LIMITATION.—Subsections (a) through (c) shall 

17 not apply to Federal assistance provided in response to 

18 a declared disaster. 

19 SEC. 4. APPLICABILITY. 

20 The prohibition under section 3— 

21 (1) includes debt restructuring or any other re22 lated activity; and 

23 (2) does not include— 

24 (A) any discretionary appropriations or di25 rect spending, as those terms are defined in 


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1 section 250(c) of the Balanced Budget and 

2 Emergency Deficit Control Act of 1985 (2 

3 U.S.C. 900(c)); and 

4 (B) any grant awarded by the United 

5 States to the State government, municipal gov6 ernment, local government, or county govern7 ment. 

Æ 


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