[Congressional Record Volume 163, Number 158 (Tuesday, October 3, 2017)]
[House]
[Pages H7704-H7706]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MUNICIPAL FINANCE SUPPORT ACT OF 2017
Mr. HUIZENGA. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 1624) to require the appropriate Federal banking agencies to
treat certain municipal obligations as level 2A liquid assets, and for
other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 1624
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 ``Municipal Finance Support
Act of 2017''.
SEC. 2. TREATMENT OF CERTAIN MUNICIPAL OBLIGATIONS.
(a) In General.--Section 18 of the Federal Deposit
Insurance Act (12 U.S.C. 1828) is amended--
(1) by moving subsection (z) so that it appears after
subsection (y); and
(2) by adding at the end the following:
[[Page H7705]]
``(aa) Treatment of Certain Municipal Obligations.--
``(1) In general.--For purposes of the final rule titled
`Liquidity Coverage Ratio: Liquidity Risk Measurement
Standards; Final Rule' (79 Fed. Reg. 61439; published October
10, 2014) (the `Final Rule') and any other regulation which
incorporates a definition of the term `high-quality liquid
asset', the appropriate Federal banking agencies shall treat
a municipal obligation that is both liquid and readily
marketable (as defined in the Final Rule) and investment
grade as of the calculation date as a high-quality liquid
asset that is no lower than a level 2B liquid asset.
``(2) Definitions.--For purposes of this subsection:
``(A) Investment grade.--With respect to an obligation, the
term `investment grade' has the meaning given that term under
part 1 of title 12, Code of Federal Regulations.
``(B) Municipal obligation.--The term `municipal
obligation' means an obligation of a State or any political
subdivision thereof, or any agency or instrumentality of a
State or any political subdivision thereof.''.
(b) Amendment to Liquidity Coverage Ratio Regulations.--Not
later than the end of the 3-month period beginning on the
date of the enactment of this Act, the Federal Deposit
Insurance Corporation, the Board of Governors of the Federal
Reserve System, and the Comptroller of the Currency shall
amend the final rule titled ``Liquidity Coverage Ratio:
Liquidity Risk Measurement Standards; Final Rule'' (79 Fed.
Reg. 61439; published October 10, 2014) to implement the
amendments made by this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Michigan (Mr. Huizenga) and the gentlewoman from California (Ms. Maxine
Waters) each will control 20 minutes.
The Chair recognizes the gentleman from Michigan.
General Leave
Mr. HUIZENGA. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days to revise and extend their remarks and to
include extraneous material on this bill.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Michigan?
There was no objection.
Mr. HUIZENGA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise today in support of much-needed legislation that
would simply fix a 2014 rule by financial regulators and allow
municipal bonds to be considered as level 2B liquid assets, at a
minimum, for purposes of calculating total high-quality liquid assets,
or HQLAs, under the liquidity coverage ratio. The Municipal Finance
Support Act is a bipartisan piece of legislation that passed
unanimously out of committee, showing its clear need.
Municipal securities are frequently issued by the transportation,
housing, and healthcare authorities of State and local governments to
raise funds to pay for projects ranging from bridges and schools to
hospitals and recreational facilities. Excluding municipal securities
from treatment as HQLAs will result in higher borrowing costs for State
and local governments during times of economic stress.
Furthermore, there is no reason why high-quality liquid bonds issued
by the United States and municipalities should receive a lower standing
than foreign sovereign debt with equivalent or, frankly, even lesser
credit quality and market liquidity.
Finally, disincentivizing financial institutions from holding
investment-grade municipal securities could cause banks to retreat from
the $3.8 trillion market, thereby forcing State and local governments
to scale back pending projects on roads, schools, and other
infrastructure projects financed with the bonds. Classifying
investment-grade municipal securities as HQLAs will ensure low-cost
infrastructure financing remains available for State and local
governments.
Although the Federal Reserve has issued an amended rule allowing
municipal bonds to count as HQLAs for some banks, neither the OCC nor
the FDIC have acted to follow the Fed's lead in amending their HQLA
definitions to include these municipal securities. Their inaction
creates a split regulatory system in which the treatment of municipal
securities for the purpose of measuring the liquidity of the bank's
holdings depends entirely upon who the regulator is.
Mr. Speaker, I urge my colleagues to support this bill, and I reserve
the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, H.R. 1624, offered by Mr. Messer and Mrs. Maloney,
represents a bipartisan effort to ensure that certain financial
institutions will continue to hold municipal securities, while also
supporting the spirit of an important bank guardrail in the Dodd-Frank
Wall Street Reform and Consumer Protection Act.
Bank regulators promulgated the liquidity coverage rule to ensure
that megabanks have a minimum number of assets that they could sell,
even in the worst markets. The rule permits banks to count assets like
Treasury securities, GSE debt, and investment-grade corporate
securities towards the pool. Regulators found that these securities
could be sold even in stressed environments, thereby allowing a
megabank to weather the storm of an economic crisis. This rule, known
as the liquidity coverage rule, is an important tool for banking
regulators to guard against the type of contagion we saw during the
financial crisis.
However, the bank regulators excluded all municipal securities
because they concluded that municipal securities, as a class, are
difficult to sell in stressed markets. This may be generally true, but
the investment-grade debt of my State of California has lots of buyers
and sellers and has a liquidity profile similar to many corporate
securities. So it makes sense that, if there are municipal securities
like California's debt that meet the same eligibility standards as
other corporate securities, they should also be counted toward a bank's
liquid assets under the rule.
The Federal Reserve quickly recognized this problem and has since
adopted a correction to permit bank holding companies under its
jurisdiction to treat municipal securities that are liquid, market
ready, and investment grade the same as similar corporate securities.
This bill, as amended, takes the relief adopted by the Federal
Reserve and extends it to banks regulated by the Office of the
Comptroller of the Currency and the Federal Deposit Insurance
Corporation. It isn't clear to me just how many municipalities will
benefit from this legislation, and I imagine most would not, but even
if only a handful of our States and cities qualify, the bill is worth
passing because it could help to reduce financing costs for those
governments.
Mr. Speaker, I appreciate Mrs. Maloney's hard work and bipartisan
efforts on this bill, and I reserve the balance of my time.
Mr. HUIZENGA. Mr. Speaker, I yield 5 minutes to the gentleman from
Indiana (Mr. Messer), the sponsor of this legislation.
Mr. MESSER. Mr. Speaker, I want to thank my coauthor on this bill,
Congresswoman Maloney, for her great leadership on this legislation, as
well as Chairman Huizenga, Chairman Hensarling, Ranking Member Waters,
and the entire Financial Services Committee team for their hard work on
this important legislation.
Mr. Speaker, it is a rare occasion in Washington when Republicans and
Democrats can come together and get behind a change to the banking
regulations, but we stand here today behind H.R. 1624 because the
banking regulators, frankly, well, they messed it up. They created a
rule that gives foreign municipalities a competitive advantage over our
American cities and towns, and this advantage is hurting our
communities.
Mr. Speaker, this legislation is really quite simple. It will help
cities and towns in my State and across the United States save money on
roads and bridges and schools. President Trump has made rebuilding our
infrastructure a priority for our Nation, and this bipartisan bill
paves the way for this type of investment by lowering the price tag for
roads and bridges.
H.R. 1624 reverses a backwards banking regulation that makes it more
expensive for U.S. municipalities to finance infrastructure projects.
Specifically, the bill will amend the regulation to enable more banks
to hold municipal bonds to cover their liquidity requirements. This
change should reduce the cost of borrowing for cities and towns across
the country. Ultimately, this bill helps taxpayers by making it cheaper
to finance infrastructure projects.
H.R. 1624 will help blue States and red States alike, and that is why
you have seen such overwhelming bipartisan support for this in the
Halls of Congress. The bill passed the Financial
[[Page H7706]]
Services Committee unanimously this summer, and very similar
legislation passed the Chamber by a voice vote last year.
{time} 1515
Still we have got more work to do, and there is now momentum in the
Senate to get H.R. 1624 across the finish line.
The bill is also supported by numerous outside advocacy groups,
including the National Governors Association, the Government Finance
Officers Association, the National League of Cities, the National
Association of State Treasurers, the U.S. Conference of Mayors, and
even the State treasurer from my home State of Indiana, my good friend,
Kelly Mitchell.
Mr. Speaker, today we take the first step in this process in the
House toward reversing this backwards regulation, and I urge all my
colleagues to support this bipartisan bill.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume, and I thank Mr. Messer for his leadership on
this legislation.
He is absolutely correct. He worked very closely with Mrs. Maloney.
This is a bipartisan bill. He correctly stated that we do sometimes get
together and work on issues in ways that we can be helpful, not only to
our constituents in general but to cities and towns. We have talked an
awful lot about wanting to improve our infrastructures, and this is one
way that it certainly can be done.
I would like to point out again the Federal Reserve's role in this
because of the way that they recognized the problem and what they did
to adopt a correction to the problem. So this bill again, as amended,
takes the relief adopted by the Federal Reserve.
Again, this is a case where we had Members who understood this
problem, moved forward on it, and recognized that the Federal Reserve
also recognized the problem. When you have several entities who have
recognized a problem, it certainly makes good sense and good public
policy for everybody to come together to correct it. So with the
Federal Reserve having come forward and adopting this relief, it means
that it is extended to banks regulated by the Office of the Comptroller
of the Currency and the Federal Deposit Insurance Corporation.
Again, I wish I could say that every city in the United States would
benefit from it, but not all will. Not all need it. But for those who
do, I think it is important for us to recognize that when we have the
opportunity to come together and to help any part of our country, and
when it is very easy to do so, I think we should do it. So I am very
pleased that we have been able to do that.
Mr. Speaker, I yield such time as she may consume to the gentlewoman
from New York (Mrs. Carolyn B. Maloney), who is the lead Democratic
cosponsor of this bill.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I thank the ranking
member for yielding and for her leadership on this issue and so many
others.
I strongly support the bill, and I would like to thank my good friend
from Indiana (Mr. Messer) for his leadership.
We introduced this bill in order to level the playing field for our
cities and States by requiring the banking regulators to treat certain
municipal bonds as liquid assets, just like corporate bonds, stocks,
and other assets.
As a former member of the city council in New York, I know firsthand
the importance of municipal bonds. They allow States and cities to
finance infrastructure, build schools, pave roads, and build subways.
They are all financed with municipal bonds.
Unfortunately, in the banking regulators' liquidity rule--which
requires banks to hold a minimum amount of liquid assets--they chose to
allow corporate bonds to qualify as liquid assets, but completely
excluded municipal bonds--even municipal bonds that are just as liquid
and high-grade as corporate bonds.
This makes no sense, and it effectively discriminates against
municipal bonds and cities. A municipal bond that is just as liquid as
the most liquid corporate bond would not be counted as a liquid asset
under the rule just because it was issued by a municipality rather than
a corporation.
The Fed has already recognized this error and has amended its rule to
fix the problem. But the OCC, which regulates national banks, is still
refusing to amend its rule and insists on favoring corporations over
municipalities. So Mr. Messer and I introduced this bill because this
kind of arbitrary discrimination against municipalities cannot be
allowed to continue.
So in sum, this bill levels the playing field for cities and States
in a way that maintains the safety and soundness of our banking system.
The bill passed the Financial Services Committee 60-0 in July, and last
Congress the bill passed the full House by a voice vote.
So I urge my colleagues to, once again, support this bipartisan
legislation which is critically important for our States and our
cities.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield back the
balance of my time.
Mr. HUIZENGA. Mr. Speaker, I rise in support of H.R. 1624. I commend
my ranking member from the Subcommittee on Capital Markets, Securities,
and Investments, Mrs. Maloney, as well as the work from my colleague
from Indiana.
This is a commonsense, no-nonsense, bipartisan solution to a mistake
that was made by regulators. We need to grant clarity and harmony to
those who are borrowing those dollars, those municipalities, States,
and cities, as well as the investors and those who hold these bonds.
Mr. Speaker, I appreciate the opportunity to be here. I am pleased
that we can support H.R. 1624, and I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Michigan (Mr. Huizenga) that the House suspend the rules
and pass the bill, H.R. 1624, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
The title of the bill was amended so as to read: ``A bill to require
the appropriate Federal banking agencies to treat certain municipal
obligations as no lower than level 2B liquid assets, and for other
purposes.''.
A motion to reconsider was laid on the table.
____________________