[Congressional Record Volume 163, Number 159 (Wednesday, October 4, 2017)]
[Extensions of Remarks]
[Page E1327]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]





                 MUNICIPAL FINANCE SUPPORT ACT OF 2017

                                 ______
                                 

                               speech of

                         HON. VICENTE GONZALEZ

                                of texas

                    in the house of representatives

                        Tuesday, October 3, 2017

  Mr. GONZALEZ of Texas. Mr. Speaker, this bill requires federal 
banking regulators to define municipal obligations as liquid, readily 
marketable and investment grade.
  Defining municipal securities in this way will allow financial 
institutions greater flexibility to manage their liquidity requirements 
and use their capital resources more impactfully and effectively. In 
short, this bill goes a long way to strengthen the liquidity risk 
management of banks, savings associations, and bank holding companies.
  This bill does all this by redefining what qualifies as ``High 
Quality Liquid Assets''. Currently HQLAs are defined as U.S. 
Treasuries, Government Debt, Investment Grade Corporate Debt, and 
Excess Reserves held by the Fed. Notably absent from that list are 
Municipal Securities.
  Better public policy calls for such securities to be redefined as 
HQLAs. This is important, because Municipal Securities are issued for 
vital purposes such as transportation projects, housing developments, 
healthcare and recreational facilities, as well as bridges, schools and 
hospitals.
  The current exclusion of Municipal securities from the HQLA 
definition reduces the eligible pool of potential purchasers of 
municipal issuances. This results in increased borrowing costs for our 
state and local governments, especially during times of economic 
stress. Simply put, high quality liquid municipal bonds (issued by U.S. 
states and local governments) should not be viewed as inferior to that 
of foreign sovereign debt. In fact, our domestic municipal issuances 
often have superior credit quality and market liquidity than do many 
foreign issuances.
  The exclusion also discourages banks and other financial institutions 
from holding investment grade municipal securities and is causing many 
bank holding companies and national banks to retreat from investing in 
such securities, thereby forcing state and local governments to scale 
back spending on roads, schools, and other infrastructure projects.
  Various former governors of the Federal Reserve have already 
suggested that some local and state debt is comparable to that of very 
liquid corporate bonds. Chairman Yellen herself has frequently declared 
her support of the expanded treatment of municipal securities as HQLAs.
  According to the American Society of Civil Engineers, our states and 
local governments expect to confront an infrastructure spending gap of 
over $2 Trillion dollars over the next 10 years. Let's pass this bill 
now so that the American people get the country they deserve.

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