I 111th CONGRESS 1st Session H. R. 2589 IN THE HOUSE OF REPRESENTATIVES May 21, 2009 Mr. Cleaver (for himself, Mr. Himes, Mr. Frank of Massachusetts, Mr. Baca, Mr. Moran of Virginia, Mr. Andrews, and Mr. Connolly of Virginia) introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To establish the Office of Public Finance in the Department of the Treasury to make available Federal reinsurance for insurers of tax-exempt municipal bonds.

1.

Short title

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

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:

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. .

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.