[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 710 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 710

   To secure additional Tier I capital for the United States banking 
  system from parties other than the Federal Government by providing 
  authority to the Secretary of the Treasury to guaranty certain new 
    preferred stock investments made by public pensions acting in a 
              collective fashion, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 27, 2009

 Mr. Ackerman 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 secure additional Tier I capital for the United States banking 
  system from parties other than the Federal Government by providing 
  authority to the Secretary of the Treasury to guaranty certain new 
    preferred stock investments made by public pensions acting in a 
              collective fashion, 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 ``Public Retiree's Investment Act of 
2009''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The United States banking system's ability to extend 
        credit on a basis consistent with healthy economic activity is 
        restricted by a need or desire to conserve capital in the face 
        of anticipated losses.
            (2) A shortage of banking capital may continue to exist 
        because private investors are generally unwilling to provide 
        such capital given their inability to accurately assess the 
        risk exposure of any individual institution while the Federal 
        Government's ability to function as a capital provider may be 
        constrained by concerns regarding Federal control of the 
        banking system as well its desire to use Federal funds in 
        numerous areas besides capitalization of the banking system.
            (3) State and local public pension funds are long term 
        investors whose constituents benefit from a well-capitalized 
        banking system with the ability to extend credit broadly at all 
        levels of the economy.
            (4) Certain State and local pension plans have broad 
        investment powers under State law which would include the 
        ability to form cooperative business endeavors solely owned by 
        them or in concert with public pension plans in other States.
            (5) Certain of these public pension plans have indicated 
        their willingness and ability to rapidly form and fund a 
        vehicle to be mutually owned by them for the sole purpose of 
        investing in preferred stocks of United States banking 
        institutions subject to certain guaranties provided by the 
        Secretary of the Treasury or other appropriate Federal 
        Government officer or agency.

SEC. 3. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Eligible investments.--The term ``eligible investment'' 
        means any preferred stock investment which meets the 
        requirements of this Act by any public pension bank capital 
        infusion fund.
            (2) Public pension plans.--The term ``public pension plan'' 
        means any State and local pension plan that has broad 
        investment powers and authority under State law, including the 
        authority to establish, administer, and participate in 
        cooperative business endeavors solely owned by the plan or 
        other public pension plans.
            (3) Public pension bank capital infusion fund.--The term 
        ``public pension bank capital infusion fund'' means any 
        investment vehicle mutually owned by public pension plans for 
        the sole purpose of investing in preferred stocks of United 
        States banking institutions, subject to certain guarantees 
        provided by the Secretary of the Treasury or other appropriate 
        Federal Government officer or agency, that meets the 
        requirements of this Act for such capital infusion funds.
            (4) Qualified equity offering.--The term ``qualified equity 
        offering'' means the sale for cash, by a financial institution 
        after the date of an investment by a public pension bank 
        capital infusion fund in any eligible investment issued by such 
        institution, of perpetual preferred stock or common stock which 
        qualifies as Tier 1 capital of such financial institution.
            (5) Reguarantee.--The term ``reguarantee'' means a 
        guarantee issued by a guarantor of the payment of, or the 
        fulfillment of any other obligation under, a guarantee issued 
        by another guarantor.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.

SEC. 4. PUBLIC PENSION PLAN INVESTMENTS IN CERTAIN BANK PREFERRED STOCK 
              INSTRUMENTS.

    (a) Guarantee and Reguarantee Authority.--The Secretary may 
guarantee eligible investments or reguarantee a guarantee of eligible 
investments.
    (b) Requirements and Procedures for Guarantees.--
            (1) Term and other conditions of guarantees.--Any guarantee 
        or reguarantee provided by the Secretary under subsection (a) 
        with respect to an eligible investment shall--
                    (A) be an unconditional guarantee for the life of 
                the eligible investment; and
                    (B) shall cover the timely payment of dividends on, 
                and the ultimate return of principal of, such eligible 
                investment, in accordance with the terms of the 
                eligible investment.
            (2) Procedures.--The process by which the Secretary shall 
        be notified of a need to perform under a guarantee or 
        reguarantee issue under subsection (a) and the manner in which 
        the Secretary shall perform the duties of guarantor or 
        reguarantor shall be mutually agreed to by the Secretary, the 
        other guarantor, in the case of a reguarantee from the 
        Secretary, and the public pension bank capital infusion fund.
    (c) Terms of Eligibility for Public Pension Plans.--
            (1) Authorized under state law.--The Secretary may not 
        guarantee or reguarantee eligible investments of a public 
        pension bank capital infusion fund under subsection (a) unless 
        each public pension plan which has a mutual ownership interest 
        in such capital infusion fund is authorized under State law to 
        establish, or participate in the formation of, a wholly owned 
        mutual fund or a limited liability corporation, in the case of 
        joint ownership with other public pension plans.
            (2) Choice of law issue.--The powers of any public pension 
        plan for purposes of this subsection shall--
                    (A) in all instances be determined by the law of 
                the domicile State of such public pension plans; and
                    (B) in the case of a joint endeavor among public 
                pension plans from different States, by a choice of law 
                agreement (among the participating public pension 
                plans) to which each State represented by a plan has 
                granted full faith and credit.
    (d) Terms of Eligibility for Eligible Investments by a Public 
Pension Bank Capital Infusion Fund.--
            (1) Maximum amount per fund.--The eligible investments of a 
        public pension bank capital infusion fund shall be eligible for 
        a guarantee or reguarantee under this section only if the 
        aggregate amount of such investments by the fund do not exceed 
        $50,000,000,000.
            (2) Institution eligible for investments.--Only an 
        investment in preferred stock that meets the requirements of 
        subsection (e) and has been issued by a financial institution 
        which meets the definition of a qualifying financial 
        institution under the TARP Capital Purchase Program established 
        under the authority of the Emergency Economic Stabilization Act 
        of 2008 may be treated as an eligible investment for purposes 
        of this Act.
    (e) Preferred Stock Requirements.--Preferred stock meets the 
requirements of this subsection if the following terms and conditions 
are met by such stock:
            (1) Security.--The stock bears senior preferred status with 
        a liquidation preference of $1,000 per share or higher as 
        provided in the TARP Capital Purchase Program.
            (2) Ranking.--The stock is senior to common stock and pari 
        passu with existing preferred shares other than preferred 
        shares which by their terms rank junior to any existing 
        preferred shares.
            (3) Regulatory capital status.--The preferred stock meets 
        the requirement for treatment as Tier I capital for the 
        financial institution which issued it.
            (4) Term.--The term of the stock is perpetual.
            (5) Dividends.--
                    (A) In general.--The stock pays cumulative 
                dividends at--
                            (i) an initial rate of 8.5 percent per 
                        year; and
                            (ii) after the end of the 1-year period 
                        beginning on the date of the enactment of this 
                        Act, at the prevailing reset rate determined in 
                        accordance with subparagraph (B).
                    (B) Reset rate.--The term ``reset rate'' means the 
                rate determined at the end of the 1-year period 
                beginning on the date of the enactment of this Act and 
                each 1-year period thereafter by adding together--
                            (i) the yield prevailing as of the close of 
                        business of the date of the determination on 
                        10-year United States treasury notes; and
                            (ii) the difference between 8.5 percent and 
                        the yield prevailing as of the close of 
                        business on the date of the enactment of this 
                        Act on 10-year United States treasury notes.
            (6) Redemption.--
                    (A) Timing.--The redemption of the stock is subject 
                to the following conditions:
                            (i) The stock may not be redeemed for a 
                        period of 3 years from the date of the initial 
                        investment by the public pension bank capital 
                        infusion fund, except with the proceeds from a 
                        qualified equity offering which results in 
                        aggregate gross proceeds to the financial 
                        institution which issued the stock of not less 
                        than 25 percent of the issue price of the 
                        stock.
                            (ii) After the third anniversary of the 
                        date of the investment, the stock may be 
                        redeemed, in whole or in part, at any time and 
                        from time to time, at the option of the 
                        financial institution.
                    (B) Amount.--All redemptions of the stock are at 
                100 percent of the issue price, plus any accrued and 
                unpaid dividends and shall be subject to the approval 
                of the primary Federal financial regulator of the 
                issuing financial institution.
            (7) Restrictions on dividends.--For as long as the 
        preferred stock is outstanding, no dividends may be declared or 
        paid on junior preferred shares, preferred shares ranking pari 
        passu with the preferred stock, or common shares (other than in 
        the case of pari passu preferred shares' dividends on a pro 
        rata basis with the preferred stock) nor may the financial 
        institution which issued the preferred stock repurchase or 
        redeem any junior preferred shares, preferred shares ranking 
        pari passu with the preferred stock, or common shares until 
        such time as the preferred stock has been redeemed in whole.
            (8) Voting rights.--The preferred stock is nonvoting, other 
        than class voting rights on--
                    (A) any authorization or issuance of shares ranking 
                senior to the preferred stock;
                    (B) any amendment to the rights of the preferred 
                stock; or
                    (C) any merger, exchange or similar transaction 
                which would adversely affect the rights of the 
                preferred stock.
            (9) Appoint of directors.--The stock instrument provides 
        that if dividends on the preferred stock are not paid in full 
        for more than 4 consecutive dividend periods, the Secretary may 
        elect 2 directors to serve on the board of directors of the 
        issuing financial institution until such time as full dividends 
        have been paid for 4 consecutive dividend periods.
            (10) Timing of guaranty payments.--The payment of guaranty 
        payments under this Act shall be pursuant to a policy mutually 
        agreed to by the Secretary, the other guarantor, in the case of 
        a reguarantee from the Secretary, and the public pension bank 
        capital infusion fund which policy shall be consistent with the 
        intent of the guarantee, as specified in section 4(b).
    (f) Effective Period of Guarantee Authority.--Notwithstanding any 
other provision of this section, any guarantee or reguarantee under 
this subsection may only be provided on an eligible investment whose 
initial issuance is made before the end of the 3-year period beginning 
on the date of the enactment of this Act .
    (g) Treatment Under Other Law.--A public pension bank capital 
infusion fund that is a mutual fund vehicle or limited liability 
corporation owned by one or more public pension plans and managed under 
contract by an appropriate service vender (as approved by the 
Secretary) who reports to the fund directly or through its chief 
investment officer shall be deemed to be a political subdivision of a 
State as that term is defined in section 414(d) of the Internal Revenue 
Code of 1986 and shall be exempt from taxation pursuant to section 115 
of such Code.
    (h) Reports.--
            (1) In general.--In the case of any guarantee or 
        reguarantee issued by the Secretary, under subsection (a), with 
        respect to eligible investments, the guarantor of such eligible 
        investments shall submit a report to the Congress (and to the 
        Secretary, in any case in which the Secretary is the 
        reguarantor) on the status of the guarantee or reguarantee.
            (2) Contents.--Each report submitted under paragraph (1) 
        shall include, at a minimum--
                    (A) the name of any institution issuing eligible 
                investments for which a guarantee is in effect;
                    (B) the face amount of each eligible investment 
                covered by the guarantee;
                    (C) the amount of dividends paid, declared and due 
                under the terms of the eligible investment; and
                    (D) the amount of any payments made by the 
                guarantor as a result of the enactment of this Act.
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