[Congressional Record Volume 155, Number 49 (Monday, March 23, 2009)]
[Extensions of Remarks]
[Pages E738-E739]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




FEDERAL MUNICIPAL BOND MARKETING SUPPORT AND SECURITIZATION ACT OF 2009

                                 ______
                                 

                        HON. GERALD E. CONNOLLY

                              of virginia

                    in the house of representatives

                         Monday, March 23, 2009

  Mr. CONNOLLY of Virginia. Madam Speaker, today I introduced the 
Federal Municipal Bond Marketing Support and Securitization Act of 2009 
to address the collateral damage suffered by our state and local 
governments as a result of the financial crisis. The nation's 55,000 
issuers of tax-exempt bonds, including most state and local 
governments, continue to experience limited access to the capital 
markets due to the liquidity crisis despite the fact that municipal 
bonds have always been among the safest investments.
  A municipal bond expert recently told me, pointedly, that it is a 
nightmare out there for those entities attempting to float bonds.
  Prior to my election to Congress last November, I spent the last 14 
years in local government as a member of the Board of Supervisors of 
Fairfax County, Virginia, the last five as Chairman. I oversaw a local 
government with an annual budget of $4.5 billion and a AAA rating from 
Wall Street's three main credit rating agencies. I understand state and 
local governments, and I believe they are the most effective engines 
for creating jobs on Main Street, whether by building new schools, fire 
stations and water treatment plants, or repairing our nation's ailing 
infrastructure and implementing our environmental agenda.
  State and local governments issue debt for their myriad projects 
through the selling of bonds, and the municipal bond market was one of 
many victims of the financial meltdown last fall. After the fallout, 
investors and money fled from those bond markets to U.S. Treasury notes 
as a safe haven. As a result, the nation's 55,000 issuers of tax-exempt 
bonds, our state and local governments, are experiencing limited access 
to the capital markets due to the liquidity crisis despite the fact 
that ``munis'' are and always have been among the safest of 
investments.
  Further complicating the issue is the fact that the private insurance 
market has virtually disappeared, eliminating a viable means of credit 
enhancement, which allows a small town water authority, for example, to 
attain the same credit-worthiness as a metropolitan transportation 
authority.
  The drying up of bond markets and lack of insurance has created a 
double-whammy of steep shortfalls and tough financial choices for state 
and local governments. In light of this fiscal and capital crisis, 
legislation is needed to direct the Secretary of the Treasury to 
establish a program to provide direct credit enhancements or insurance 
for municipal bonds to help our state and local partners move forward 
on their shovel-ready projects.
  House Financial Services Committee Chairman Barney Frank agreed with 
me during a colloquy on the subject in mid-January in which he called 
states and municipalities among the most sympathetic victims of the 
economic turmoil. Since then, I have been consulting with Chairman 
Frank, my colleagues, municipal governments and others who are active 
in the municipal bond market to craft a solution. What I proposed today 
may not provide the ultimate solution, but it provides a starting point 
to begin addressing this critical situation.
  My legislation directs the Secretary of the Treasury and Federal 
Reserve Board to work together to strategically intervene in the 
municipal bond market to restore liquidity and spark local job 
creation. It gives the Treasury Secretary the authority, either 
directly or through the Federal Financing Bank, to provide credit 
enhancements or guarantees or to outright purchase municipal bonds. It 
calls on the Federal Reserve to exercise its authority to establish a 
credit facility for the express purpose of assisting our local and 
state partners. Of course, the method, source, timing and conditions of 
any new financing arrangement would be subject to Treasury's approval.
  The federal government historically has been reluctant to interfere 
with the municipal markets, but I believe such concerns could be

[[Page E739]]

addressed by imposing some reasonable limits and conditions on the 
nature and amount of assistance to minimize risk. Furthermore, 
municipal bonds historically have a solid performance rating with a low 
rate of default.
  A basic measure for the public to have confidence that the recovery 
and reinvestment package is working will be the creation of jobs and 
the completion of physical projects. President Obama has set the goal 
of creating three to four million jobs. Unlike the financial services 
relief plan, in which the reward for our investment was largely unseen 
by the general public, expectations are high for tangible results--
paychecks and progress--from this stimulus plan.
  It is my firm belief that the primary vehicle for delivering on that 
promise will be our investments in state and local governments, but we 
first need to ensure that localities are ready to run with the ball 
once we make the hand-off. That will require immediate federal action 
to stabilize their fiscal situation and to revive the municipal bond 
market.
  I believe this bill can help stabilize the municipal bond market, and 
I look forward to working with Chairman Frank and other interested 
members in finding a solution to this serious problem.

                          ____________________