I 111th CONGRESS 1st Session H. R. 1669 IN THE HOUSE OF REPRESENTATIVES March 23, 2009 Mr. Connolly of Virginia introduced the following bill; which was referred to the Committee on Financial Services A BILL To require the Secretary of the Treasury to establish a market for municipal securities, to require cooperation between the Secretary and the Chairman of the Board of Governors of the Federal Reserve System in addressing the municipal securities market situation including through the establishment of municipal securities funding facilities, and for other purposes.

1.

Short title; definitions

(a)

Short title

This Act may be cited as the Federal Municipal Bond Marketing Support and Securitization Act of 2009. (b)

Definitions

For purposes of this Act the following definitions shall apply: (1)

Board

The term Board means the Board of Governors of the Federal Reserve System. (2)

Guarantee

The term guarantee has the same meaning as in section 3 of the Federal Financing Bank Act of 1978. (3)

Municipal security defined

The term municipal security has the same meaning as in section 3(a)(30) of the Securities Exchange Act of 1934 and includes pooled investment funds under trusts established by State or local governmental entities and higher education savings plan trusts established by States to the extent any such trust is not excluded by the Secretary and does not consist of funds invested by persons other than States or municipalities the investment of which is subject to the direction of such person. (4)

Secretary

The term Secretary means the Secretary of the Treasury.

2.

Cooperation to address limitations on access to markets for municipal securities

Upon the enactment of this Act, the Secretary of the Treasury and the Board of Governors of the Federal Reserve System shall consult with each other extensively for the purpose of— (1)finding solutions for the grave effects of the current financial crisis on the markets for municipal securities; and (2)cooperating in the activities authorized under this Act to alleviate to the extent practicable such effects on the municipal securities markets.

3.

Purchase, sale, guarantee, and securitization of municipal securities by Secretary and Federal Financing Bank authorized

(a)

In general

The Secretary of the Treasury shall establish a program, directly or through the Federal Financing Bank, to— (1)purchase municipal securities; (2)issue securities backed by pools of such municipal securities; and (3)provide credit enhancement or guarantees for municipal securities. (b)

Specific authority

In addition to the authority conferred under section 6 of the Federal Financing Bank Act of 1973 and subject to subsections (b) and (c) of such section, the Federal Financing Bank may— (1)make commitments to purchase and sell, and to purchase and sell on terms and conditions determined by the Bank, any municipal security issued under a plan approved by the Secretary under subsection (c); (2)may guarantee the repayment of principal and interest on any municipal security issued under a plan approved by the Secretary under subsection (c); and (3)may issue and sell instruments representing interests in a pool consisting of municipal securities purchased by the Federal Financing Bank under this section. (c)

Authority of secretary over method, source, timing, terms, and conditions of municipal securities issued for purchase under this section

To insure the orderly and coordinated marketing of municipal securities for purchase or guarantee as to principal and interest under this section, and to ensure that appropriate financing planning has been made with respect to such municipal securities, no municipal security may be purchased or guaranteed under this section unless the Secretary has approved, prior to the issuance of any such security — (1)the method of financing; (2)the source of financing; (3)the timing of financing in relation to market conditions and financing by Federal agencies; and (4)the financing terms and conditions, including rates of interest and maturities, of the municipal securities. (d)

Status of insurance and instruments

Municipal securities sold by the Secretary, or by the Federal Financing Bank under subsection (b)(1), and instruments issued by the Secretary, or by the Bank under subsection (b)(3), that represent pools consisting of municipal securities— (1)may be insured by the Secretary or the Bank, respectively, as to the payment of principal or interest by the issuer of the municipal security; and (2)shall not, other than in connection with a guarantee referred to in paragraph (1), be treated for any purpose as an instrument which has the full faith and credit of the United States.

4.

Federal Reserve Board credit facility

(a)

Establishment authorized

The Board of Governors of the Federal Reserve System may establish a credit facility, using resources and authority available under the Federal Reserve Act, including section 10B and the third undesignated paragraph of section 13 of such Act, to provide financial resources for the purchase of municipal securities by Federal reserve banks or member banks or other persons. (b)

Funding for secretary and federal financing bank

Subject to the conditions described in the third undesignated paragraph of section 13, the Board may establish a credit facility, or use any credit facility established under subsection (a), to provide funds to the Secretary or the Federal Financing Bank to carry out any authority under section 3.

5.

Budget authority

Any authority of the Secretary or the Federal Financing Bank under this Act to purchase or guarantee municipal securities shall be effective for any fiscal year only to the extent or in amounts provided in advance in appropriation Acts.