I 

111TH CONGRESS 

1ST SESSION H. R. 2589 

To establish the Office of Public Finance in the Department of the Treasury 

to make available Federal reinsurance for insurers of tax-exempt municipal bonds. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 21, 2009 

Mr. CLEAVER (for himself, Mr. HIMES, Mr. FRANK of Massachusetts, 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 establish the Office of Public Finance in the Department 

of the Treasury to make available Federal reinsurance 

for insurers of tax-exempt municipal bonds. 

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 Bond Insur5 ance Enhancement Act of 2009’’. 


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1 SEC. 2. OFFICE OF PUBLIC FINANCE AND FEDERAL REIN2 SURANCE FOR INSURERS OF TAX-EXEMPT 

3 MUNICIPAL BONDS. 

4 (a) IN GENERAL.—Subchapter I of chapter 3 of title 

5 31, United States Code, is amended by adding at the end 

6 the following new section: 

7 ‘‘SEC. 314. THE OFFICE OF PUBLIC FINANCE. 

8 ‘‘(a) ESTABLISHMENT AND PERSONNEL.— 

9 ‘‘(1) ESTABLISHMENT.—There is hereby estab10 lished in the Department of the Treasury an office 

11 to be known as the ‘Office of Public Finance’ (in 

12 this section referred to as the ‘Office’). 

13 ‘‘(2) DIRECTOR; STAFFING.—The Secretary of 

14 the Treasury shall appoint the Director of the Of15 fice, as well as such other staff as the Secretary be16 lieves necessary for the Office to carry out its duties 

17 under this Act. 

18 ‘‘(b) FEDERAL REINSURANCE FOR INSURERS OF

19 TAX-EXEMPT MUNICIPAL BONDS.— 

20 ‘‘(1) ESTABLISHMENT.—The Director of the 

21 Office of Public Finance shall carry out a program 

22 under this subsection to provide reinsurance for in23 sured losses of qualified municipal bond insurers. 

24 ‘‘(2) QUALIFIED MUNICIPAL BOND INSURERS.— 

25 Reinsurance coverage under this subsection may be 


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1 made available only for an insurer, including an in2 surer that is an affiliate of another entity— 

3 ‘‘(A) that is licensed or admitted to engage 

4 in the business, in any State, of providing in5 surance for the payment of principal and inter6 est due under— 

7 ‘‘(i) any municipal bond; or 

8 ‘‘(ii) any bond, note, security, or other 

9 debt obligation issued by a special purpose 

10 corporation, trust, or other entity to fi11 nance a project serving a substantial public 

12 purpose; and 

13 ‘‘(B) that has, as of the date of purchase 

14 of reinsurance coverage under this subsection— 

15 ‘‘(i) a corporate or other governing 

16 charter that prohibits the insurer from 

17 providing coverage for risks other than the 

18 risks specified in subparagraph (A) and 

19 such bonds issued by public purpose 

20 issuers or ultimate obligors as are not in21 consistent with the intent of Municipal 

22 Bond Insurance Enhancement Act of 2009 

23 and as may be approved generally or spe24 cifically by the Director of the Office of 


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1 Public Finance or the relevant insurance 

2 regulator; or 

3 ‘‘(ii) entered into an agreement with 

4 the Director to only provide coverage for 

5 the risks specified in clause (i). 

6 A qualified municipal bond insurer shall not be 

7 precluded from retaining or performing any ob8 ligations in place prior to entering into such an 

9 agreement with the Office. 

10 ‘‘(3) TERMS OF REINSURANCE.—Reinsurance 

11 coverage under this subsection shall be subject to 

12 the following requirements: 

13 ‘‘(A) PREMIUMS.—The Director shall es14 tablish and collect risk-based premiums for 

15 such coverage. Premium charges under this 

16 subparagraph shall be established in amounts 

17 that are sufficient, but do not exceed, the min18 imum amounts necessary to cover the costs (as 

19 such term is defined in section 502 of the Fed20 eral Credit Reform Act of 1990 (2 U.S.C. 

21 661(a)) of such reinsurance coverage and to 

22 cover administrative costs of the Secretary that 

23 are associated with the program for such cov24 erage. 


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1 ‘‘(B) OTHERS.—The Director shall estab2 lish such other terms for such coverage as the 

3 Director determines are appropriate to provide 

4 additional capacity in the market for insurance 

5 of State and local bonds in the most cost-effi6 cient manner. 

7 ‘‘(4) PROGRAM LIMIT.—The aggregate par 

8 value of bonds, notes, security, and other debt obli9 gations for which reinsurance is provided under the 

10 program under this subsection in any of fiscal years 

11 2010 through 2014 may not exceed 

12 $50,000,000,000. 

13 ‘‘(5) AUTHORIZATION OF APPROPRIATIONS.— 

14 There is authorized to be appropriated such sums as 

15 may be necessary for administrative costs of car16 rying out the program under this subsection during 

17 the first 12 months of the operation of such pro18 gram. 

19 ‘‘(6) DIVESTMENT.—Not later than the expira20 tion of the 5-year period beginning on the date of 

21 the enactment of this Act, the Secretary of the 

22 Treasury shall— 

23 ‘‘(A) establish and submit to the Congress 

24 a plan providing for the sale of the reinsurance 

25 assets acquired under the program under this 


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1 subsection, except that any such sale shall not 

2 reduce the credit rating of bonds insured under 

3 such program or the relevant qualified munic4 ipal bond insurer through the submission of of5 fers to purchase such assets; and 

6 ‘‘(B) implement such plan, including solic7 iting offers for the purchase of such operations. 

8 ‘‘(7) DEFINITIONS.—For purposes of this sub9 section, the following definitions shall apply: 

10 ‘‘(A) INSURED LOSS.—The term ‘insured 

11 loss’ means any loss resulting from any munic12 ipal bond that is covered by insurance provided 

13 by a qualified municipal bond insurer. 

14 ‘‘(B) MUNICIPAL BOND.—The term ‘mu15 nicipal bond’ means any bond, note, security, or 

16 other debt obligation issued by any State or po17 litical subdivision thereof, or by any other entity 

18 eligible to issue bonds treated as a State or 

19 local bond (as such term is defined in section 

20 103(c) of the Internal Revenue Code of 1986 

21 and the regulations issued thereunder) 

22 ‘‘(C) QUALIFIED MUNICIPAL BOND IN23 SURER.—The term ‘qualified municipal bond in24 surer’ means an insurer that meets the requireVerDate Nov 24 2008 20:15 May 24, 2009 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2589.IH H2589

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1 ments in paragraph (2) for reinsurance cov2 erage under this subsection.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections 

4 for subchapter I of chapter 3 of title 31, United States 

5 Code, is amended by adding at the end the following: 

‘‘314. The Office of Public Finance.’’. 

6 SEC. 3. REINSURANCE BY OFFICE OF PUBLIC FINANCE NOT 

7 TREATED AS FEDERAL GUARANTEE UNDER 

8 TAX EXEMPT BOND REQUIREMENTS. 

9 (a) IN GENERAL.—Subparagraph (A) of section 

10 149(b)(3) of the Internal Revenue Code of 1986 is amend11 ed by striking ‘‘or’’ at the end of clause (ii), by striking 

12 the period at the end of clause (iii) and inserting ‘‘, or’’, 

13 and by adding at the end the following new clause: 

14 ‘‘(iv) any guarantee by the Office of 

15 Public Finance.’’. 

16 (b) EFFECTIVE DATE.—The amendments made by 

17 this section shall take effect on the date of the enactment 

18 of this Act. 

Æ 


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