II 112th CONGRESS 1st Session S. 251 IN THE SENATE OF THE UNITED STATES February 1, 2011 Mr. Vitter (for himself, Mr. Crapo, and Mr. DeMint) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To prohibit the provision of Federal funds to State and local governments for payment of obligations, to prohibit the Board of Governors of the Federal Reserve System from financially assisting State and local governments, and for other purposes.

1.

Prohibition on the use of Federal funds to pay State and local obligations

(a)

In general

Notwithstanding any other provision of law, no Federal funds may be used to purchase or guarantee obligations of, issue lines of credit to, or provide direct or indirect grants-and-aid to, any State government, municipal government, local government, or county government which, on or after January 26, 2011, has defaulted on its obligations, is at risk of defaulting, or is likely to default, absent such assistance from the United States Government. (b)

Limit on Use of Borrowed Funds

The Secretary of the Treasury shall not, directly or indirectly, use general fund revenues or funds borrowed pursuant to title 31, United States Code, to purchase or guarantee any asset or obligation of any State government, municipal government, local government, or county government, or otherwise to assist such government entity, if, on or after January 26, 2011, that State government, municipal government, or county government has defaulted on its obligations, is at risk of defaulting, or is likely to default, absent such assistance from the United States Government. (c)

Prohibition on Federal Reserve assistance

Notwithstanding any other provision of law, the Board of Governors of the Federal Reserve System shall not provide or extend to, or authorize with respect to, any State government, municipal government, local government, county government, or other entity that has taxing authority or bonding authority, any funds, loan guarantees, credits, or any other financial instrument or other authority, including the purchasing of the bonds of such State, municipality, locality, county, or other bonding authority, or to otherwise assist such government entity under any authority of the Board of Governors. (d)

Limitation

Subsections (a) through (c) shall not apply to Federal assistance provided in response to a natural disaster.