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SECTION 1. SHORT TITLE.

This Act may be cited as the ''Monetary Policy and Treasury Finance
Enhancement Act of 1993''.

SEC. 2. PURPOSES.

The purposes of this Act are to facilitate the inference of
inflation expectations by the Board of Governors of the Federal Reserve
System and by investors, to assist the Board of Governors in reducing
inflation, and, through lower inflation, to contribute to lower
interest rates.

SEC. 3. ISSUANCE OF INDEXED OBLIGATIONS.

(a) In General.--Subchapter I of chapter 31 of title 31, United
States Code, is amended by adding at the end thereof the following new
section:
''Sec. 3114. Indexed Obligations
''(a) Mandatory Issuances.--
''(1) In general.--At least 10 percent of the aggregate
face amount of longer-term public debt obligations issued
during a fiscal year shall be in the form of indexed
obligations.
''(2) Higher requirement in certain cases.--If, as of the
beginning of any fiscal year, less than 10 percent of the
aggregate face amount of outstanding obligations issued under
section 3102 and 3103 and having at least 5 years to maturity
are in the form of indexed obligations, the aggregate face
amount of longer-term public debt obligations issued during
such fiscal year which shall be in the form of indexed
obligations shall be at least the greater of--
''(A) the amount required to be in such form under
paragraph (1), or
''(B) 2 percent of the aggregate face amount of
obligations issued under section 3102 and 3103 which,
as of the beginning of such fiscal year, are
outstanding and have at least 5 years to maturity.
The indexed face amount of an outstanding indexed obligation
shall be taken into account under this subparagraph and
subsection (c) (in lieu of its actual face amount) in
determining the amount of indexed obligations required or
permitted to be issued.
''(3) Longer-term public debt obligations.--For purposes of
this subsection, the term 'longer-term public debt obligation'
means any obligation issued under section 3102 or 3103 which
matures at least 5 years after the date of issue.
''(b) Discretionary Issuances.--
''(1) In general.--The Secretary of the Treasury may issue
obligations under section 3102 or 3103 which mature at least
270 days but less than 5 years after the date of issue in the
form of indexed obligations.
''(2) Minimum issuance if discretion exercised.--The
Secretary of the Treasury may exercise the authority under this
subsection only if at least 5 percent of the aggregate face
amount of the obligations referred to in paragraph (1) which
are issued during a fiscal year are in the form of indexed
obligations.
''(c) Aggregate Limit.--Not more than 50 percent of the aggregate
face amount of obligations issued under section 3102 or 3103 which
mature on any day shall be in the form of indexed obligations.
''(d) Indexed Obligations.--For purposes of this section--
''(1) In general.--The term 'indexed obligations' means any
obligation--
''(A) which has a redemption value at maturity
equal to its indexed face amount,
''(B) which has a face amount at issuance of at
least $1,000 but not more than $5,000,
''(C) which may not be redeemed before maturity,
and
''(D) the interest (if any) on which is payable for
any period on the basis of its indexed face amount as
of the beginning of such period.
''(2) Indexed face amount.--The term 'indexed face amount'
means, as of any date, the sum of--
''(A) the face amount of the obligation at
issuance, plus
''(B) such face amount multiplied by the percentage
by which--
''(i) the selected index for such date,
exceeds
''(ii) the selected index for the issue
date of the obligation.
''(3) Selected index for date.--The selected index for any
date is the selected index for the second calendar month
preceding the calendar month in which such date occurs. If the
selected index is not determined on a monthly basis, the
Secretary of the Treasury shall prescribe a rule for
determining the selected index for any date, and such
prescribed rule shall apply in lieu of the preceding sentence.
''(4) Selected index.--
''(A) In general.--Except as provided in
subparagraph (B), the term 'selected index' means the
CPI.
''(B) Another index may be used.--If the Secretary
of the Treasury and the Chairman of the Board of
Governors of the Federal Reserve System--
''(i) agree that the use of the CPI for
purposes of paragraph (2) is unsatisfactory and
that the use of another index would be more
satisfactory for such purposes, and
''(ii) submit a report to Congress jointly
recommending the use of such other index,
the term 'selected index' means such other index.
''(C) Changes in index.--The selected index
applicable to any indexed obligation shall be such
index as of the date of issue of such obligation, and
such index shall be determined, with respect to such
obligation, without regard to changes in its structure
or computation after such date.
''(5) CPI.--The term 'CPI' means the Consumer Price Index
for all urban consumers published by the Department of Labor.
''(e) Terms and Conditions.--Indexed obligations may be offered for
sale on a competitive or other basis under such regulations and upon
such terms and conditions as the Secretary of the Treasury may
prescribe. The Secretary shall provide that such obligations shall be
available for purchase by individuals both directly from the Department
of the Treasury and through Federal Reserve System facilities.
''(f) Consultation With Federal Reserve.--The Secretary of the
Treasury shall consult with the Chairman of the Board of Governors of
the Federal Reserve System in determining the amounts, maturities, and
timing of issuances of indexed obligations under this section. The
Secretary shall maintain appropriate records of all recommendations
received from the Chairman in such consultations.
''(g) Considerations.--In determining the amounts, maturities, and
timing of issuances of indexed obligations under this section, the
Secretary of the Treasury shall--
''(1) attribute reasonable benefits to improvements in
monetary management resulting from the issuance of indexed
obligations, including reasonable estimates for reduced
interests costs on obligations that are not indexed obligations
arising from better inflation control and from smaller budget
deficits as a consequence of improved economic stabilization,
and
''(2) assure liquidity and pricing reliability in indexed
obligations and the competitiveness of such obligations with
nonindexed obligations issued under section 3102 and 3103 with
comparable maturities, including assuring that each issue of
interest-bearing indexed obligations is of an amount sufficient
to permit the right to receive interest on such obligations to
be traded separately from the underlying obligations.
The Secretary shall periodically announce expected issuance and
maturity dates of issues of indexed obligations and the expected
proportion of the total obligations issued under sections 3102 and 3103
having those maturity dates which are expected to be indexed
obligations. Such announcements shall precede expected issuance dates
by at least 1 year.
''(h) Monitoring.--The Secretary of the Treasury shall monitor the
ownership and trading activity of indexed and nonindexed obligations
issued under section 3102 or 3103 having the same maturity dates for
purposes of assuring liquidity and pricing reliability with respect to
indexed obligations.
''(i) Reports.--Not later than 2 years after the date of the
enactment of this section, and not later than the close of each 2-year
period thereafter, the Secretary of the Treasury shall submit to the
Congress a report on the program established under this section. No
report shall be required under this subsection for any period after the
10th year after the date of the enactment of this section.''.
(b) Procedure.--Subsection (a) of section 3121 of such title 31 is
amended by striking ''and'' at the end of paragraph (6), by
redesignating paragraph (7) as paragraph (8), and by inserting after
paragraph (6) the following new paragraph:
''(7) whether the obligation is to be issued as an indexed
obligation; and''.
(c) Clerical Amendment.--The table of sections for subchapter I of
chapter 31 of title 31 of such Code is amended by adding at the end
thereof the following new item:

''3114. Indexed obligations.''.
(d) Effective Date.--The amendments made by this section shall
apply to fiscal years beginning after the date of the enactment of this
Act.
(e) Taxation.--It is the intent of the Congress that--
(1) except for changes to minimize any Federal income tax
incentives or disincentives to acquiring indexed obligations as
compared to nonindexed obligations, Federal income tax changes
which affect nonindexed obligations should apply to the fullest
extent feasible to indexed obligations, and
(2) there should be symmetrical treatment applied to
increases and decreases in the indexed face amount of an
indexed obligation such that, for example, if increases in the
indexed face amount of an obligation are includible in gross
income as ordinary income, decreases in the indexed face amount
of an obligation should be allowable as a deduction as an
ordinary loss.
Output:
Monetary Policy and Treasury Finance Enhancement Act of 1993 - Requires at least ten percent of the aggregate face amount of longer-term public debt obligations (bonds or notes which mature at least five years after the date of issue) issued during a fiscal year to be in the form of indexed obligations. Specifies a higher requirement in certain cases.
Allows the Secretary of the Treasury to issue bond and note obligations which mature at least 270 days but less than five years after the date of issue in the form of indexed obligations.
Prohibits more than 50 percent of the aggregate face amount of bond or note obligations which mature on any day from being in the form of indexed obligations.
Bases indexed obligations on the Consumer Price Index.
Provides for the Secretary to determine the amounts, maturities, and timing of issuances of indexed obligations. Requires the Secretary to monitor the ownership and trading activity of indexed and nonindexed obligations having the same maturity dates to assure liquidity and pricing reliability.
Requires the Secretary to report to the Congress on provisions of this Act every two years until the tenth year after enactment.
Expresses the intent of the Congress with respect to Federal income tax treatment of indexed and nonindexed obligations.