WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.), a senior member of the Senate Banking Committee, introduced the Municipal Bonds Emergency Relief Act (MBERA), which would allow the Federal Reserve to buy municipal debt to help local and state governments finance the delivery of key public services due to the COVID-19 health emergency. In the past week, borrowing costs for municipalities have skyrocketed, making it more difficult to finance the coronavirus response.
“States and localities are on the front lines in the fight against COVID-19 and need assistance from the federal government to be able to finance the increasing costs of the response to this health emergency,” said Sen. Menendez. “The Municipal Bonds Emergency Relief Act would do that by allowing the Federal Reserve to provide support to state and local governments for this crisis and similar future emergencies.”
The MBERA would amend Section 14(b) of the Federal Reserve Act (12 U.S.C. 355) to allow the Federal Reserve to buy municipal bonds under unusual and exigent circumstances.
The bill is supported by national organizations including the American Securities Association (ASA), the Government Finance Officers Association (GFOA), and the Securities Industry, the Financial Markets Association (SIFMA), the National Association of State Treasurers (NAST) and the National League of Cities (NLC).
“Senator Mendendez’s bill is important to relieve the pressure America’s municipal bond market can experience during times of stress, like now," said Chris Iacovella, CEO, American Securities Association. "This will help to provide critical support to local and state economies across the country at a time when they need the markets to function smoothly. We urge strong bipartisan support and swift passage.”
"Public Finance Officers from cities, counties, schools, water districts, and more across the country applaud Senator Menendez' support of our national infrastructure network through his firm and unfailing support of a strong municipal bond market," said Emily Brock, Director of Public Policy, Government Finance Officers Association. "As frontline public entities, we are aware of the costs that our jurisdictions see ahead of them in ensuring sustainability for their communities. Senator Menendez efforts will ensure that the capital markets that keep their communities moving are healthy and sustainable as well."
"SIFMA applauds the introduction of the Municipal Bonds Emergency Relief Act, which aims to support the municipal bond market during this volatile time. The municipal bond market is one of our nation's most remarkable financial institutions, providing a mechanism whereby more than 50,000 state and local government units can raise money for public purposes that benefit communities and ensure their sustainability," said Kenneth E. Bentsen, Jr., President and CEO, Securities Industry and Financial Markets Association. "We appreciate the attention paid to this important sector of the markets and thank Senator Menendez for introducing this legislation to help states and localities use these financing tools to address the current crisis."
“As states continue to serve on the frontlines of responding to the COVID-19 outbreak, we applaud Senator Menendez’s efforts to restore stability to our municipal markets,” said Shaun Snyder, Executive Director of the National Association of State Treasurers . “Municipal markets serve as the backbone for state finance and will undoubtedly be essential to states’ efforts to respond to this unprecedented crisis. We are proud to support the Municipal Bonds Emergency Relief Act and our champions in Congress working to address the current market conditions.”
“The municipal bond market is at a disturbing standstill, with investors pulling money out, causing interest rates to spike,” said Clarence E. Anthony, CEO and Executive Director of the National League of Cities. “Cities, towns and villages rely on a well-functioning marketplace to ensure their financing and to underpin our national infrastructure network. The National League of Cities strongly supports Senator Bob Menendez’s efforts to fight to include language in the third stimulus bill to help stabilize the municipal bond market.”
The full text of the bill can be downloaded here.