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 Mas-
sachusetts, Mr. CLEAVER, Mr. BACA, Mr. MORAN of Virginia, Mr. AN-
DREWS, and Mr. CONNOLLY of Virginia) introduced the following bill; 
which was referred to the Committee on Financial Services, and in addi-
tion to the Committee on Ways and Means, for a period to be subse-
quently 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 Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Municipal Market Li-
quidity Enhancement Act of 2009’’. 
VerDate Nov 24 2008 
17:25 May 24, 2009
Jkt 079200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H2551.IH
H2551
hsrobinson on PROD1PC76 with BILLS
SEC. 2. FEDERAL RESERVE LENDING AUTHORITY FOR CER-
TAIN 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 SE-
CURITIES PURCHASES.— 
‘‘(A) IN GENERAL.—In unusual and exi-
gent circumstances, the Board, by the affirma-
tive 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 ad-
vances to a special purpose vehicle or a des-
ignated corporate entity on the promissory 
notes of such special purpose vehicle or des-
ignated corporate entity secured to the satisfac-
tion of such Federal reserve bank by the securi-
ties described in subparagraph (B) or by other 
forms of security. 
‘‘(B) RESTRICTIONS
ON
USE
OF
AD-
VANCES.—Such advances authorized by this 
paragraph shall— 
‘‘(i) be used solely to finance the pur-
chase by such special purpose vehicle or 
designated corporate entity of—— 
VerDate Nov 24 2008 
17:25 May 24, 2009
Jkt 079200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H2551.IH
H2551
hsrobinson on PROD1PC76 with BILLS
‘‘(I) variable rate demand obliga-
tions issued prior to the date of the 
enactment of this paragraph by a mu-
nicipal securities issuer, 
‘‘(II) variable rate demand obli-
gations issued to refund variable rate 
demand obligations issued prior to the 
date of the enactment of this para-
graph, 
‘‘(III) variable rate demand obli-
gations 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 ve-
hicle or designated corporate entity and 
the obligation or note issuer whereby the 
special purpose vehicle or designated cor-
porate entity agrees to purchase obliga-
tions or notes that are made publicly avail-
VerDate Nov 24 2008 
17:25 May 24, 2009
Jkt 079200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H2551.IH
H2551
hsrobinson on PROD1PC76 with BILLS
able 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 de-
partment in making such advances authorized 
by this paragraph. 
‘‘(D) NOT TO BE CONSTRUED AS A LIMITA-
TION.—Nothing in this paragraph shall be con-
strued to limit the authority of the Federal re-
serve banks or the Board under other para-
graphs of this section. 
‘‘(E) MUNICIPAL
SECURITY
ISSUER
DE-
FINED.—For purposes of this paragraph, the 
term ‘municipal security issuer’ means any enti-
ty that has the ability to issue a bond treated 
as a ‘State or local bond’ (as such term is de-
fined in section 103(c) of the Internal Revenue 
Code of 1986 and the regulations issued there-
under).’’. 
VerDate Nov 24 2008 
17:25 May 24, 2009
Jkt 079200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H2551.IH
H2551
hsrobinson on PROD1PC76 with BILLS
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 MU-
NICIPAL SECURITIES.— 
‘‘(1) CLARIFICATION.—The authority of the 
Secretary to take any action under this title includes 
the authority to provide credit enhancement in con-
nection with municipal securities whose purchase is 
financed under any facility designed to enhance li-
quidity 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 out-
standing for purposes of authorization to pur-
chase limitations under section 115. 
‘‘(3) DEFINITION.—For purposes of this sub-
section, the term ‘municipal security’ means any 
VerDate Nov 24 2008 
17:25 May 24, 2009
Jkt 079200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H2551.IH
H2551
hsrobinson on PROD1PC76 with BILLS
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 there-
under).’’. 
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 Inter-
nal 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)).’’. 
Æ 
VerDate Nov 24 2008 
17:25 May 24, 2009
Jkt 079200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6301
E:\BILLS\H2551.IH
H2551
hsrobinson on PROD1PC76 with BILLS