Title: Government Bailout Prevention Act
Policy area: Economics and Public Finance

Summary:

Government Bailout Prevention Act
This bill prohibits the use of federal funds to purchase or guarantee obligations of, issue lines of credit to, or provide grants to any state (defined to include the District of Columbia and any U.S. territory or possession), municipal, local, or county government that, on or after January 1, 2019, has defaulted on its obligations, is at risk of defaulting, or has filed for bankruptcy.
The Department of the Treasury is prohibited from using general fund revenues or borrowed funds to purchase or guarantee any asset or obligation of any such state, municipal, local, or county government.
Federal Reserve banks are prohibited from assisting such a state, municipal, local, or county government or other entity with taxing or bonding authority.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2120 Introduced in Senate (IS)]

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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.

    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 ``Government Bailout Prevention Act''.

SEC. 2. DEFINITION.

    In this Act, the term ``State'' means--
            (1) any of the several States;
            (2) the District of Columbia; and
            (3) any territory or possession of the United States.

SEC. 3. PROHIBITION ON THE USE OF FEDERAL FUNDS TO PAY OR GUARANTEE 
              STATE AND LOCAL OBLIGATIONS.

    (a) In General.--Notwithstanding any other provision of law, no 
Federal funds may be used to purchase or guarantee obligations of, 
issue lines of credit to, or provide direct or indirect grants-and-aid 
to, any State government, municipal government, local government, or 
county government which, on or after January 1, 2019, has filed for 
bankruptcy, has defaulted on its obligations, is at risk of defaulting, 
or is likely to default, absent such assistance from the United States 
Government.
    (b) Limit on Use of Borrowed Funds.--The Secretary of the Treasury 
shall not, directly or indirectly, use general fund revenues or funds 
borrowed pursuant to title 31, United States Code, to purchase or 
guarantee any asset or obligation of any State government, municipal 
government, local government, or county government, or otherwise to 
assist such government entity, if, on or after January 1, 2019, that 
State government, municipal government, or county government has 
defaulted on its obligations, has filed for bankruptcy, is at risk of 
defaulting, or is likely to default, absent such assistance from the 
United States Government.
    (c) Prohibition on Federal Reserve Assistance.--Notwithstanding any 
other provision of law, no Federal Reserve Bank may provide or extend 
to, or authorize with respect to, any State government, municipal 
government, local government, county government, or other entity that 
has taxing authority or bonding authority, any funds, loan guarantees, 
credits, or any other financial instrument, including the purchasing of 
the bonds of such State, municipality, locality, county, or other 
bonding authority, or to otherwise assist such government entity under 
any authority of any Federal Reserve Bank.
    (d) Limitation.--Subsections (a) through (c) shall not apply to 
Federal assistance provided in response to a declared disaster.

SEC. 4. APPLICABILITY.

    The prohibition under section 3--
            (1) includes debt restructuring or any other related 
        activity; and
            (2) does not include--
                    (A) any discretionary appropriations or direct 
                spending, as those terms are defined in section 250(c) 
                of the Balanced Budget and Emergency Deficit Control 
                Act of 1985 (2 U.S.C. 900(c)); and
                    (B) any grant awarded by the United States to the 
                State government, municipal government, local 
                government, or county government.
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