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Q: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Municipal Bond Insurance Enhancement
Act of 2009''.

SEC. 2. OFFICE OF PUBLIC FINANCE AND FEDERAL REINSURANCE FOR INSURERS
OF TAX-EXEMPT MUNICIPAL BONDS.

(a) In General.--Subchapter I of chapter 3 of title 31, United
States Code, is amended by adding at the end the following new section:

''SEC. 314. THE OFFICE OF PUBLIC FINANCE.

''(a) Establishment and Personnel.--
''(1) Establishment.--There is hereby established in the
Department of the Treasury an office to be known as the 'Office
of Public Finance' (in this section referred to as the
'Office').
''(2) Director; staffing.--The Secretary of the Treasury
shall appoint the Director of the Office, as well as such other
staff as the Secretary believes necessary for the Office to
carry out its duties under this Act.
''(b) Federal Reinsurance for Insurers of Tax-Exempt Municipal
Bonds.--
''(1) Establishment.--The Director of the Office of Public
Finance shall carry out a program under this subsection to
provide reinsurance for insured losses of qualified municipal
bond insurers.
''(2) Qualified municipal bond insurers.--Reinsurance
coverage under this subsection may be made available only for
an insurer, including an insurer that is an affiliate of
another entity--
''(A) that is licensed or admitted to engage in the
business, in any State, of providing insurance for the
payment of principal and interest due under--
''(i) any municipal bond; or
''(ii) any bond, note, security, or other
debt obligation issued by a special purpose
corporation, trust, or other entity to finance
a project serving a substantial public purpose;
and
''(B) that has, as of the date of purchase of
reinsurance coverage under this subsection--
''(i) a corporate or other governing
charter that prohibits the insurer from
providing coverage for risks other than the
risks specified in subparagraph (A) and such
bonds issued by public purpose issuers or
ultimate obligors as are not inconsistent with
the intent of Municipal Bond Insurance
Enhancement Act of 2009 and as may be approved
generally or specifically by the Director of
the Office of Public Finance or the relevant
insurance regulator; or
''(ii) entered into an agreement with the
Director to only provide coverage for the risks
specified in clause (i).
A qualified municipal bond insurer shall not be
precluded from retaining or performing any obligations
in place prior to entering into such an agreement with
the Office.
''(3) Terms of reinsurance.--Reinsurance coverage under
this subsection shall be subject to the following requirements:
''(A) Premiums.--The Director shall establish and
collect risk-based premiums for such coverage. Premium
charges under this subparagraph shall be established in
amounts that are sufficient, but do not exceed, the
minimum amounts necessary to cover the costs (as such
term is defined in section 502 of the Federal Credit
Reform Act of 1990 (2 U.S.C. 661(a)) of such
reinsurance coverage and to cover administrative costs
of the Secretary that are associated with the program
for such coverage.
''(B) Others.--The Director shall establish such
other terms for such coverage as the Director
determines are appropriate to provide additional
capacity in the market for insurance of State and local
bonds in the most cost-efficient manner.
''(4) Program limit.--The aggregate par value of bonds,
notes, security, and other debt obligations for which
reinsurance is provided under the program under this subsection
in any of fiscal years 2010 through 2014 may not exceed
$50,000,000,000.
''(5) Authorization of appropriations.--There is authorized
to be appropriated such sums as may be necessary for
administrative costs of carrying out the program under this
subsection during the first 12 months of the operation of such
program.
''(6) Divestment.--Not later than the expiration of the 5-
year period beginning on the date of the enactment of this Act,
the Secretary of the Treasury shall--
''(A) establish and submit to the Congress a plan
providing for the sale of the reinsurance assets
acquired under the program under this subsection,
except that any such sale shall not reduce the credit
rating of bonds insured under such program or the
relevant qualified municipal bond insurer through the
submission of offers to purchase such assets; and
''(B) implement such plan, including soliciting
offers for the purchase of such operations.
''(7) Definitions.--For purposes of this subsection, the
following definitions shall apply:
''(A) Insured loss.--The term 'insured loss' means
any loss resulting from any municipal bond that is
covered by insurance provided by a qualified municipal
bond insurer.
''(B) Municipal bond.--The term 'municipal bond'
means any bond, note, security, or other debt
obligation issued by any State or political subdivision
thereof, or by any other entity eligible to issue bonds
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 thereunder)
''(C) Qualified municipal bond insurer.--The term
'qualified municipal bond insurer' means an insurer
that meets the requirements in paragraph (2) for
reinsurance coverage under this subsection.''.
(b) Clerical Amendment.--The table of sections for subchapter I of
chapter 3 of title 31, United States Code, is amended by adding at the
end the following:

''314. The Office of Public Finance.''.

SEC. 3. REINSURANCE BY OFFICE OF PUBLIC FINANCE NOT TREATED AS FEDERAL
GUARANTEE UNDER TAX EXEMPT BOND REQUIREMENTS.

(a) In General.--Subparagraph (A) of section 149(b)(3) of the
Internal 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 guarantee by the Office of
Public Finance.''.
(b) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act.
A:
Municipal Bond Insurance Enhancement Act of 2009 - Establishes in the Department of the Treasury the Office of Public Finance. Requires the Director of such Office to carry out a program to provide reinsurance for insured losses of municipal bond insurers.

Directs the Secretary of the Treasury to establish and submit to Congress within five years after the enactment of this Act a plan for the sale of reinsurance assets acquired under this Act.

Amends the Internal Revenue Code to provide that reinsurance provided by this Act shall not be treated as a federal guarantee for purposes of disallowing the exemption of interest on municipal bonds.