H. Rept. 115-1010 - CONGRESSIONAL ACCOUNTABILITY FOR EMERGENCY LENDING PROGRAMS ACT OF 2017115th Congress (2017-2018)
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115th Congress } { Rept. 115-1010
HOUSE OF REPRESENTATIVES
2d Session } { Part 1
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CONGRESSIONAL ACCOUNTABILITY FOR EMERGENCY LENDING PROGRAMS ACT OF 2017
_______
November 6, 2018.--Ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 4302]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 4302) to amend the Federal Reserve Act to create
congressional accountability for emergency lending programs,
and for other purposes, having considered the same, report
favorably thereon without amendment and recommend that the bill
do pass.
Purpose and Summary
On November 8, 2017, Representative Scott Tipton introduced
H.R. 4302 the ``Congressional Accountability for Emergency
Lending Programs Act of 2017'', which requires Congress to
ratify Federal Reserve loans issued under Section 13(3) of the
Federal Reserve Act while allowing any such loan to remain
outstanding for up to 60 days without ratification, makes
supervisory information more readily available to emergency
lending decisions, and establishes a more prudent minimum
interest rate for emergency loans.
Background and Need for Legislation
H.R. 4302 clearly defines responsibilities of the Board of
Governors of the Federal Reserve System (Federal Reserve) and
the United States Congress to both preserve the Federal
Reserve's capacity to extend emergency credit in a timely
manner and hold Congress accountable for the fiscal
consequences.
The Federal Reserve enjoys political independence to
conduct monetary policy. It does so, however, with
accountability to Congress to comply with its dual legislative
mandate of price stability and full employment.
Accountability for fiscal policy, on the other hand, lies
immediately with Congress. And while the Federal Reserve can
effectively serve as our government's fiscal agent, it must
absolutely avoid the expansion of its mandate to include a
principal-role in credit policies. Nevertheless, Americans have
repeatedly watched their monetary authority stretch its mandate
to the breaking point, with the unfortunate result of increased
financial fragility and decreased economic opportunity.
Doing better requires a brighter line between
accountability for monetary and credit policies. Announcing the
bipartisan legislation with former U.S. Senator David Vitter of
Louisiana, Senator Elizabeth Warren (D-MA) highlighted the
consequences of our continued failure to do so:\1\
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\1\Senator Elizabeth Warren, ``Warren, Vitter Introduced Bailout
Prevention Act,'' May 13, 2015. Press release available at https://
www.warren.senate.gov/?p=press_release&id;=818.
If big financial institutions know they can get cheap
cash from the Fed in a crisis, they have less incentive
to manage their risks carefully--which further
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increases the chance of another financial crisis.
Sounding a similar alarm while questioning the Honorable
Alice Rivlin during a full-Committee hearing, Representative
Brad Sherman (D-CA) emphasized that:\2\
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\2\Full-Committee hearing entitled ``Rethinking the Federal
Reserve's Many Mandates on its 100-Year Anniversary,'' December 12,
2013, available at https://financialservices.house.gov/
calendar/eventsingle.aspx?EventID=363599.
I hope we look at Section 13(3), which remains the
most dangerous economic provision in our statute books.
It allows unlimited lending by the Fed, trillions of
dollars at times. And we at least ought to make sure
that those loans are default-risk-free, or as close to
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that as they can achieve.
Unfortunately, the ``danger'' that Congressman Sherman
highlights will metastasize again if there is no accountability
for credit policies. Following the introduction of the
``Warren-Vitter'' legislation, Dennis Kelleher, President and
CEO of Better Markets, thus warned that:\3\
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\3\Dennis Kelleher, ``Better Markets Statement on the Introduction
of the Bailout Prevention Act,'' May 13, 2015. Accessed at https://
bettermarkets.com/newsroom/better-markets-statement-introduction-
bailout-prevention-act.
While the much smaller $700 billion TARP program
received widespread scrutiny, the Fed's trillions in
bailouts did not. In fact, the public and even its
elected officials in Congress were mostly kept in the
dark about these bailouts. That was wrong. The Dodd-
Frank Wall Street Reform and Consumer Protection Act
made some modest changes to limit the Fed's ability to
bailout Wall Street in the future, but more needs to be
done if taxpayers are to be protected, bailouts are to
be limited, too big to fail is to be ended and market
discipline is to apply to Wall Street like the rest of
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America's banks and businesses.
Observations like these led Columbia University's Charles
Calomiris and Stanford University's Stephen Haber to ask a
simple question: ``why do citizens tolerate this?''\4\ The
Congressional Accountability for Emergency Lending Act answers
that questions and would allow the Federal Reserve to serve as
an agent for the government's credit policies, but only with
the resolution of a Congress that is accountable to voters.
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\4\Charles W. Calomiris and Stephen H. Haber, Fragile by Design,
Princeton University Press, 2014, p. 10.
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H.R. 4302 adopts the ``Warren-Vitter'' framework of
Congressional authorization for emergency banking credit, which
MIT Professor, Simon Johnson characterized:\5\
---------------------------------------------------------------------------
\5\Senator Elizabeth Warren, ``Warren, Vitter Introduced Bailout
Prevention Act,'' May 13, 2015. Press release available at https://
www.warren.senate.gov/?p=press_release&id;=818.
This bill proposes a major improvement to the
emergency powers of the Federal Reserve System. The
ability of the Fed to react to systemic danger remains
strong. But in this proposal, under certain
circumstances, the Fed would need not to just explain
its actions but also seek congressional approval. It
makes sense to fast track the approval process--so the
Fed will get a fair hearing and Members of Congress
must vote on whether to support what the Fed has done.
We retain sufficient flexibility and fire-fighting
capacity for the Fed, along with significantly more
democratic accountability. This is the best way to
safeguard our financial system while also ensuring that
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the Fed retains its political legitimacy.
By insulating monetary policy from the political pressures
of credit policy, the Congressional Accountability for
Emergency Lending Act can improve both monetary policy and
credit policy, and do so in a manner that Americans for
Financial Reform\6\ characterized as aligning ``not only with
the intent of the Dodd-Frank Act, but with traditional
principles of central bank lending that go back centuries.''\7\
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\6\``About AFR: Americans for Financial Reform is a nonpartisan and
nonprofit coalition of more than 200 civil rights, consumer, labor,
business, investor, faith-based, and civic and community groups. Formed
in the wake of the 2008 crisis, we are working to lay the foundation
for a strong, stable, and ethical financial system--one that serves the
economy and the nation as a whole. AFR has been called ``the leading
voice for Wall Street accountability'' in Washington (by Zach Carter of
the Huffington Post).'' (Source: http://ourfinancialsecurity.org/about/
).
\7\Quoted from Senator Elizabeth Warren, ``Warren, Vitter
Introduced Bailout Prevention Act,'' May 13, 2015. Press release
available at https://www.warren.senate.gov/?p=press_release&id;=818.
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Hearings
The Committee on Financial Services Subcommittee on
Monetary Policy and Trade held a hearing examining matters
relating to H.R. 4302 on November 7, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
November 14, 2017, and ordered H.R. 4302 to be reported
favorably to the House without amendment by a recorded vote of
34 yeas to 25 nays (Record vote no. FC-100), a quorum being
present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House without amendment. The
motion was agreed to by a recorded vote of 34 yeas to 25 nays
(Record vote no. FC-100), a quorum being present.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 4302
will provide for a more accountable emergency lending facility
by providing for the Congressional approval of Federal Reserve
loans issued under Section 13(3) of the Federal Reserve Act,
making supervisory information more readily available to
lending decisions, and establishing a more prudent minimum
interest rate.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 18, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4302, the
Congressional Accountability for Emergency Lending Programs Act
of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Nathaniel
Frentz.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 4302--Congressional Accountability for Emergency Lending Programs
Act of 2017
H.R. 4302 would amend the Federal Reserve's authority under
section 13(3) of the Federal Reserve Act to create and use
certain lending facilities.
Under current law, the Federal Reserve has broad discretion
to make loans to banks and nonbanks under unusual and exigent
circumstances. Such lending requires the approval of the
Secretary of the Treasury and at least five members of the
Board of Governors of the Federal Reserve, must have broad-
based participant eligibility, and cannot be made to insolvent
firms.
In 2008, the Federal Reserve exercised its section 13(3)
authority to create new lending facilities to provide liquidity
in the context of the financial crisis. That lending resulted
in interest earnings for the Federal Reserve that increased its
remittances to the Treasury, which are recorded in the budget
as revenues.
H.R. 4302 would make a number of changes to the Federal
Reserve's Section 13(3) lending authority:
Limit eligibility to firms predominantly
engaged in financial activities,
Require that emergency lending be used only
for circumstances that pose a threat to the financial
stability of the United States,
Require approval of the Secretary of the
Treasury and two-thirds of the members of the Federal
Open Market Committee for emergency lending,
Prohibit the Federal Reserve from accepting
equity capital as collateral for emergency lending and
require the Federal Reserve to issue a rule with
standards for collateral taken against emergency
lending,
Add, as a condition of emergency lending,
that all federal banking regulators with jurisdiction
over a borrower to certify that the borrower is not
insolvent,
Require a joint resolution of Congress
approving an emergency facility or else it is
terminated within 30 days of receiving a report
notifying Congress of recent lending activity, and
provide for a fast-track procedure for such a joint
resolution, and,
Require that a minimum interest rate be
charged on emergency lending.
Because enacting H.R. 4302 could affect revenues, pay-as-
you-go procedures apply. However, CBO has no basis for
estimating the magnitude or direction of the effects on
revenues. Based on its own analysis of historical lending and
information provided by the Federal Reserve, CBO estimates that
the amount of any emergency lending that would occur in the
future would likely be reduced by the bill, in part from the
new restrictions on eligible firms but primarily from the new
required minimum interest rate. That lower amount of lending,
at a higher interest rate, could either increase or decrease
the Federal Reserve's earnings and thereby its remittances. Any
such effects would be significantly discounted given the low
probability of any emergency lending occurring over the next 10
years.
To the extent that such lending has effects on the broader
economy, a reduction in the amount or types of lending could
have budgetary effects that are much larger than any effect on
Federal Reserve remittances.
CBO has no basis for estimating whether enacting H.R. 4302
would significantly increase net direct spending or on-budget
deficits in any of the four consecutive 10-year periods
beginning in 2029.
H.R. 4302 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Nathaniel
Frentz. The estimate was reviewed by John McClelland, Assistant
Director, Tax Analysis Division.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Section-by-Section Analysis of the Legislation
Section 1. Short title
This Section cites H.R. 4302 as the Congressional
Accountability for Emergency Lending Act of 2017.
Section 2. Congressional accountability for emergency lending programs
This Section provides for the Congressional approval of
Federal Reserve loans issued under Section 13(3) of the Federal
Reserve Act, makes supervisory information more readily
available to lending decisions, and establishes a more prudent
minimum interest rate.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
FEDERAL RESERVE ACT
* * * * * * *
powers of federal reserve banks.
Sec. 13. Any Federal reserve bank may receive from any of its
member banks or other depository institutions, and from the
United States, deposits of current funds in lawful money,
national-bank notes, Federal reserve notes, or checks, and
drafts, payable upon presentation or other items, and also, for
collection, maturing notes and bills; or, solely for purposes
of exchange or of collection, may receive from other Federal
reserve banks deposits of current funds in lawful money,
national-bank notes, or checks upon other Federal reserve
banks, and checks and drafts, payable upon presentation within
its district or other items, and maturing notes and bills
payable within its district; or, solely for the purposes of
exchange or of collection, may receive from any nonmember bank
or trust company or other depository institution deposits of
current funds in lawful money, national-bank notes, Federal
reserve notes, checks and drafts payable upon presentation or
other items, or maturing notes and bills: Provided, Such
nonmember bank or trust company or other depository institution
maintains with the Federal reserve bank of its district a
balance in such amount as the Board determines taking into
account items in transit, services provided by the Federal
Reserve bank, and other factors as the Board may deem
appropriate: Provided further, That nothing in this or any
other section of this Act shall be construed as prohibiting a
member or nonmember bank or other depository institution from
making reasonable charges, to be determined and regulated by
the Board of Governors of the Federal Reserve System, but in no
case to exceed 10 cents per $100 or fraction thereof, based on
the total of checks and drafts presented at any one time, for
collection or payment of checks and drafts and remission
therefor by exchange or otherwise; but no such charges shall be
made against the Federal reserve banks.
Upon the indorsement of any of its member banks, which shall
be deemed a waiver of demand, notice and protest by such bank
as to its own indorsement exclusively, any Federal reserve bank
may discount notes, drafts, and bills of exchange arising out
of actual commercial transactions; that is, notes, drafts, and
bills of exchange issued or drawn for agricultural, industrial,
or commercial purposes, or the proceeds of which have been
used, or are to be used, for such purposes, the Board of
Governors of the Federal Reserve System to have the right to
determine or define the character of the paper thus eligible
for discount, within the meaning of this Act. Nothing in this
Act contained shall be construed to prohibit such notes,
drafts, and bills of exchange, secured by staple agricultural
products, or other goods, wares, or merchandise from being
eligible for such discount, and the notes, drafts, and bills of
exchange of factors issued as such making advances exclusively
to producers of staple agricultural products in their raw state
shall be eligible for such discount; but such definition shall
not include notes, drafts, or bills covering merely investments
or issued or drawn for the purpose of carrying or trading in
stocks, bonds, or other investment securities, except bonds and
notes of the Government of the United States. Notes, drafts,
and bills admitted to discount under the terms of this
paragraph must have a maturity at the time of discount of not
more than 90 days, exclusive of grace.
(3)(A) In unusual and exigent circumstances that pose a
threat to the financial stability of the United States , the
Board of Governors of the Federal Reserve System, by [the
affirmative vote of not less than five members] the prior
approval of the Secretary of the Treasury and not less than \2/
3\ of the members of the Federal Open Market Committee , may
authorize any Federal reserve bank, during such periods as the
said board may determine, at rates established in accordance
with the provisions of section 14, subdivision (d), of this
Act, to discount for any financial institution participant in
any program or facility with broad-based eligibility, notes,
drafts, and bills of exchange when such notes, drafts, and
bills of exchange are indorsed or otherwise secured to the
satisfaction of the Federal Reserve bank: Provided, That before
discounting any such note, draft, or bill of exchange, the
Federal reserve bank shall obtain evidence that such financial
institution participant in any program or facility with broad-
based eligibility is unable to secure adequate credit
accommodations from other banking institutions. All such
discounts for any financial institution participant in any
program or facility with broad-based eligibility shall be
subject to such limitations, restrictions, and regulations as
the Board of Governors of the Federal Reserve System may
prescribe.
(B)(i) As soon as is practicable after the date of
enactment of this subparagraph, the Board shall
establish, by regulation, in consultation with the
Secretary of the Treasury, the policies and procedures
governing emergency lending under this paragraph. Such
policies and procedures shall be designed to ensure
that any emergency lending program or facility is for
the purpose of providing liquidity to the financial
system, and not to aid a failing financial company, and
that the security for emergency loans is sufficient to
protect taxpayers from losses and that any such program
is terminated in a timely and orderly fashion. The
policies and procedures established by the Board shall
require that a Federal reserve bank assign, consistent
with sound risk management practices and to ensure
protection for the taxpayer, a lendable value to all
collateral for a loan executed by a Federal reserve
bank under this paragraph in determining whether the
loan is secured satisfactorily for purposes of this
paragraph. Federal reserve banks may not accept equity
securities issued by the recipient of any loan or other
financial assistance under this paragraph as
collateral. Not later than 6 months after the date of
the enactment of this sentence, the Board shall, by
rule, establish--
(I) a method for determining the
sufficiency of the collateral required
under this paragraph;
(II) acceptable classes of
collateral;
(III) the amount of any discount on
the value of the collateral that the
Federal reserve banks will apply for
purposes of calculating the sufficiency
of collateral under this paragraph; and
(IV) a method for obtaining
independent appraisals of the value of
collateral the Federal reserve banks
receive.
(ii) The Board shall establish procedures to
prohibit borrowing from programs and facilities
by borrowers that are insolvent. A borrower
shall not be eligible to borrow from any
emergency lending program or facility unless
the Board and all Federal banking regulators
with jurisdiction over the borrower certify
that, at the time the borrower initially
borrows under the program or facility, the
borrower is not insolvent. [Such procedures may
include a certification from the chief
executive officer (or other authorized officer)
of the borrower, at the time the borrower
initially borrows under the program or facility
(with a duty by the borrower to update the
certification if the information in the
certification materially changes), that the
borrower is not insolvent.] A borrower shall be
considered insolvent for purposes of this
subparagraph, if the borrower is in bankruptcy,
resolution under title II of the Dodd-Frank
Wall Street Reform and Consumer Protection Act,
or any other Federal or State insolvency
proceeding.
(iii) A program or facility that is
structured to remove assets from the balance
sheet of a single and specific company, or that
is established for the purpose of assisting a
single and specific company avoid bankruptcy,
resolution under title II of the Dodd-Frank
Wall Street Reform and Consumer Protection Act,
or any other Federal or State insolvency
proceeding, shall not be considered a program
or facility with broad-based eligibility.
[(iv) The Board may not establish any program
or facility under this paragraph without the
prior approval of the Secretary of the
Treasury.]
(C) The Board shall provide to the Committee on
Banking, Housing, and Urban Affairs of the Senate and
the Committee on Financial Services of the House of
Representatives--
(i) not later than 7 days after the Board
authorizes any loan or other financial
assistance under this paragraph, a report that
includes--
(I) the justification for the
exercise of authority to provide such
assistance;
(II) the identity of the recipients
of such assistance;
(III) the date and amount of the
assistance, and form in which the
assistance was provided; and
(IV) the material terms of the
assistance, including--
(aa) duration;
(bb) collateral pledged and
the value thereof;
(cc) all interest, fees, and
other revenue or items of value
to be received in exchange for
the assistance;
(dd) any requirements imposed
on the recipient with respect
to employee compensation,
distribution of dividends, or
any other corporate decision in
exchange for the assistance;
and
(ee) the expected costs to
the taxpayers of such
assistance; and
(ii) once every 30 days, with respect to any
outstanding loan or other financial assistance
under this paragraph, written updates on--
(I) the value of collateral;
(II) the amount of interest, fees,
and other revenue or items of value
received in exchange for the
assistance; and
(III) the expected or final cost to
the taxpayers of such assistance.
(D) The information required to be submitted to
Congress under subparagraph (C) related to--
(i) the identity of the financial institution
participants in an emergency lending program or
facility commenced under this paragraph;
(ii) the amounts borrowed by each financial
institution participant in any such program or
facility;
(iii) identifying details concerning the
assets or collateral held by, under, or in
connection with such a program or facility,
shall be kept confidential, upon the written
request of the Chairman of the Board, in which
case such information shall be made available
only to the Chairpersons or Ranking Members of
the Committees described in subparagraph (C).
(E) If an entity to which a Federal reserve bank has
provided a loan under this paragraph becomes a covered
financial company, as defined in section 201 of the
Dodd-Frank Wall Street Reform and Consumer Protection
Act, at any time while such loan is outstanding, and
the Federal reserve bank incurs a realized net loss on
the loan, then the Federal reserve bank shall have a
claim equal to the amount of the net realized loss
against the covered entity, with the same priority as
an obligation to the Secretary of the Treasury under
section 210(b) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
(G) Joint resolution of approval.--
(i) In general.--A program or facility
created under subparagraph (A) shall terminate
on the date that is 30 calendar days after the
date on which Congress receives a report
described in subparagraph (C) unless there is
enacted into law a joint resolution approving
the program or facility not later than 30
calendar days after the date on which the
report is received. Any loan offered through
the program or facility that is outstanding as
of the date on which the program or facility is
terminated shall be repaid in full not later
than 30 calendar days after the date on which
the program or facility is terminated.
(ii) Contents of joint resolution.--For the
purpose of this subparagraph, the term ``joint
resolution'' means only a joint resolution--
(I) that is introduced not later than
3 calendar days after the date on which
the report described in subparagraph
(C) is received by Congress;
(II) that does not have a preamble;
(III) the title of which is as
follows: ``Joint resolution relating to
the approval of a program or facility
created by the Board of Governors of
the Federal Reserve System''; and
(IV) the matter after the resolving
clause of which is as follows: ``That
Congress approves the program or
facility created by the Board of
Governors of the Federal Reserve System
on __________.'' (The blank space being
appropriately filled in).
(iii) Fast track consideration in house of
representatives.--
(I) Reconvening.--Upon receipt of a
report under subparagraph (C), the
Speaker, if the House would otherwise
be adjourned, shall notify the Members
of the House that, pursuant to this
subparagraph, the House shall convene
not later than the second calendar day
after receipt of such report.
(II) Reporting and discharge.--Any
committee of the House of
Representatives to which a joint
resolution is referred shall report it
to the House not later than 5 calendar
days after the date of receipt of the
report described in subparagraph (C).
If a committee fails to report the
joint resolution within that period,
the committee shall be discharged from
further consideration of the joint
resolution and the joint resolution
shall be referred to the appropriate
calendar.
(III) Proceeding to consideration.--
After each committee authorized to
consider a joint resolution reports it
to the House or has been discharged
from its consideration, it shall be in
order, not later than the sixth day
after Congress receives the report
described in subparagraph (C), to move
to proceed to consider the joint
resolution in the House. All points of
order against the motion are waived.
Such a motion shall not be in order
after the House has disposed of a
motion to proceed on the joint
resolution. The previous question shall
be considered as ordered on the motion
to its adoption without intervening
motion. The motion shall not be
debatable. A motion to reconsider the
vote by which the motion is disposed of
shall not be in order.
(IV) Consideration.--The joint
resolution shall be considered as read.
All points of order against the joint
resolution and against its
consideration are waived. The previous
question shall be considered as ordered
on the joint resolution to its passage
without intervening motion except 2
hours of debate equally divided and
controlled by the proponent and an
opponent. A motion to reconsider the
vote on passage of the joint resolution
shall not be in order.
(iv) Fast track consideration in senate.--
(I) Reconvening.--Upon receipt of a
report under subparagraph (C), if the
Senate has adjourned or recessed for
more than 2 days, the majority leader
of the Senate, after consultation with
the minority leader of the Senate,
shall notify the Members of the Senate
that, pursuant to this subparagraph,
the Senate shall convene not later than
the second calendar day after receipt
of such report.
(II) Placement on calendar.--Upon
introduction in the Senate, the joint
resolution shall be placed immediately
on the calendar.
(III) Floor consideration.--
(aa) In general.--
Notwithstanding Rule XXII of
the Standing Rules of the
Senate, it is in order at any
time during the period
beginning on the fourth day
after the date on which
Congress receives a report
described in subparagraph (C)
and ending on the sixth day
after the date on which
Congress receives the report
(even though a previous motion
to the same effect has been
disagreed to) to move to
proceed to the consideration of
the joint resolution, and all
points of order against the
joint resolution (and against
consideration of the joint
resolution) are waived. The
motion to proceed is not
debatable. The motion is not
subject to a motion to
postpone. A motion to
reconsider the vote by which
the motion is agreed to or
disagreed to shall not be in
order. If a motion to proceed
to the consideration of the
resolution is agreed to, the
joint resolution shall remain
the unfinished business until
disposed of.
(bb) Debate.--Debate on the
joint resolution, and on all
debatable motions and appeals
in connection therewith, shall
be limited to not more than 10
hours, which shall be divided
equally between the majority
and minority leaders or their
designees. A motion further to
limit debate is in order and
not debatable. An amendment to,
or a motion to postpone, or a
motion to proceed to the
consideration of other
business, or a motion to
recommit the joint resolution
is not in order.
(cc) Vote on passage.--The
vote on passage shall occur
immediately following the
conclusion of the debate on a
joint resolution, and a single
quorum call at the conclusion
of the debate if requested in
accordance with the rules of
the Senate.
(dd) Rulings of the chair on
procedure.--Appeals from the
decisions of the Chair relating
to the application of the rules
of the Senate, as the case may
be, to the procedure relating
to a joint resolution shall be
decided without debate.
(v) Coordination with action by other
house.--
(I) In general.--If, before the
passage by one House of a joint
resolution of that House, that House
receives from the other House a joint
resolution, then the following
procedures shall apply:
(aa) The joint resolution of
the other House shall not be
referred to a committee.
(bb) With respect to a joint
resolution of the House
receiving the resolution--
(AA) the procedure in
that House shall be the
same as if no joint
resolution had been
received from the other
House, but
(BB) the vote on
passage shall be on the
joint resolution of the
other House.
(II) Treatment of joint resolution of
other house.--If one House fails to
introduce or consider a joint
resolution under this section, the
joint resolution of the other House
shall be entitled to expedited floor
procedures under this section.
(III) Consideration after passage.--
If, following passage of the joint
resolution in the Senate, the Senate
then receives the companion measure
from the House of Representatives, the
companion measure shall not be
debatable.
(IV) Vetoes.--If the President vetoes
the joint resolution, the period
beginning on the date the President
vetoes the joint resolution and ending
on the date the Congress receives the
veto message with respect to the joint
resolution shall be disregarded in
computing the 30-calendar day period
described in clause (i) and debate on a
veto message in the Senate under this
section shall be 1 hour equally divided
between the majority and minority
leaders or their designees.
(V) Rules of house of representatives
and senate.--This subparagraph is
enacted by Congress--
(aa) as an exercise of the
rulemaking power of the Senate
and House of Representatives,
respectively, and as such it is
deemed a part of the rules of
each House, respectively, but
applicable only with respect to
the procedure to be followed in
that House in the case of a
joint resolution, and it
supersedes other rules only to
the extent that it is
inconsistent with such rules;
and
(bb) with full recognition of
the constitutional right of
either House to change the
rules (so far as relating to
the procedure of that House) at
any time, in the same manner,
and to the same extent as in
the case of any other rule of
that House.
(H) Penalty rate.--
(i) In general.--Not later than 6 months
after the date of enactment of this
subparagraph, the Board shall, with respect to
a recipient of any loan or other financial
assistance under this paragraph, establish by
rule a minimum interest rate on the principal
amount of any loan or other financial
assistance.
(ii) Minimum interest rate defined.--In this
subparagraph, the term ``minimum interest
rate'' shall mean the sum of--
(I) the average of the secondary
discount rate of all Federal reserve
banks over the most recent 90-day
period; and
(II) the average of the difference
between a distressed corporate bond
yield index (as defined by rule of the
Board) and a bond yield index of debt
issued by the United States (as defined
by rule of the Board) over the most
recent 90-day period.
(I) Financial institution participant defined.--For
purposes of this paragraph, the term ``financial
institution participant''--
(i) means a company that is predominantly
engaged in financial activities (as defined in
section 102(a) of the Financial Stability Act
of 2010 (12 U.S.C. 5311(a))); and
(ii) does not include an agency described in
subparagraph (W) of section 5312(a)(2) of title
31, United States Code, or an entity controlled
or sponsored by such an agency.
Upon the indorsement of any of its member banks, which shall
be deemed a waiver of demand, notice, and protest by such bank
as to its own indorsement exclusively, and subject to
regulations and limitations to be prescribed by the Board of
Governors of the Federal Reserve System, any Federal reserve
bank may discount or purchase bills of exchange payable at
sight or on demand which grow out of the domestic shipment or
the exportation of nonperishable, readily marketable
agricultural and other staples and are secured by bills of
lading or other shipping documents conveying or securing title
to such staples: Provided, That all such bills of exchange
shall be forwarded promptly for collection, and demand for
payment shall be made with reasonable promptness after the
arrival of such staples at their destination: Provided further,
That no such bill shall in any event be held by or for the
account of a Federal reserve bank for a period in excess of
ninety days. In discounting such bills Federal reserve banks
may compute the interest to be deducted on the basis of the
estimated life of each bill and adjust the discount after
payment of such bills to conform to the actual life thereof.
The aggregate of notes, drafts, and bills upon which any
person, copartnership, association, or corporation is liable as
maker, acceptor, indorser, drawer, or guarantor, rediscounted
for any member bank, shall at no time exceed the amount for
which such person, copartnership, association, or corporation
may lawfully become liable to a national banking association
under the terms of section 5200 of the Revised Statutes, as
amended: Provided, however, That nothing in this paragraph
shall be construed to change the character or class of paper
now eligible for rediscount by Federal reserve banks.
Any Federal reserve bank may discount acceptances of the
kinds hereinafter described, which have a maturity at the time
of discount of not more than 90 days' sight, exclusive of days
of grace, and which are indorsed by at least one member bank:
Provided, That such acceptances if drawn for an agricultural
purpose and secured at the time of acceptance by warehouse
receipts or other such documents conveying or securing title
covering readily marketable staples may be discounted with a
maturity at the time of discount of not more than six months'
sight exclusive of days of grace.
(7)(A) Any member bank and any Federal or State branch or
agency of a foreign bank subject to reserve requirements under
section 7 of the International Banking Act of 1978 (hereinafter
in this paragraph referred to as ``institutions''), may accept
drafts or bills of exchange drawn upon it having not more than
six months' sight to run, exclusive of days of grace--
(i) which grow out of transactions involving the
importation or exportation of goods;
(ii) which grow out of transactions involving the
domestic shipment of goods; or
(iii) which are secured at the time of acceptance by
a warehouse receipt or other such document conveying or
securing title covering readily marketable staples.
(B) Except as provided in subparagraph (C), no institution
shall accept such bills, or be obligated for a participation
share in such bills, in an amount equal at any time in the
aggregate to more than 150 per centum of its paid up and
unimpaired capital stock and surplus or, in the case of a
United States branch or agency of a foreign bank, its dollar
equivalent as determined by the Board under subparagraph (H).
(C) The Board, under such conditions as it may prescribe, may
authorize, by regulation or order, any institution to accept
such bills, or be obligated for a participation share in such
bills, in an amount not exceeding at any time in the aggregate
200 per centum of its paid up and unimpaired capital stock and
surplus or, in the case of a United States branch or agency of
a foreign bank, its dollar equivalent as determined by the
Board under subparagraph (H).
(D) Notwithstanding subparagraphs (B) and (C), with respect
to any institution, the aggregate acceptances, including
obligations for a participation share in such acceptances,
growing out of domestic transactions shall not exceed 50 per
centum of the aggregate of all acceptances, including
obligations for a participation share in such acceptances,
authorized for such institution under this paragraph.
(E) No institution shall accept bills, or be obligated for a
participation share in such bills, whether in a foreign or
domestic transaction, for any one person, partnership,
corporation, association or other entity in an amount equal at
any time in the aggregate to more than 10 per centum of its
paid up and unimpaired capital stock and surplus, or, in the
case of a United States branch or agency of a foreign bank, its
dollar equivalent as determined by the Board under subparagraph
(H), unless the institution is secured either by attached
documents or by some other actual security growing out of the
same transaction as the acceptance.
(F) With respect to an institution which issues an
acceptance, the limitations contained in this paragraph shall
not apply to that portion of an acceptance which is issued by
such institution and which is covered by a participation
agreement sold to another institution.
(G) In order to carry out the purposes of this paragraph, the
Board may define any of the terms used in this paragraph, and,
with respect to institutions which do not have capital or
capital stock, the Board shall define an equivalent measure to
which the limitations contained in this paragraph shall apply.
(H) Any limitation or restriction in this paragraph based on
paid-up and unimpaired capital stock and surplus of an
institution shall be deemed to refer, with respect to a United
States branch or agency of a foreign bank, to the dollar
equivalent of the paid-up capital stock and surplus of the
foreign bank, as determined by the Board, and if the foreign
bank has more than one United States branch or agency, the
business transacted by all such branches and agencies shall be
aggregated in determining compliance with the limitation or
restriction.
Any Federal reserve bank may make advances for periods not
exceeding fifteen days to its member banks on their promissory
notes secured by the deposit or pledge of bonds, notes,
certificates of indebtedness or Treasury bills of the United
States, or by the deposit or pledge of debentures or other such
obligations of Federal intermediate credit banks which are
eligible for purchase by Federal reserve banks under section 13
(a) of this Act, or by the deposit or pledge of bonds issued
under the provisions of subsection (c) of section 4 of the Home
Owners' Loan Act of 1933, as amended; and any Federal reserve
bank may make advances for periods not exceeding ninety days to
its member banks on their promissory notes secured by such
notes, drafts, bills of exchange, or bankers' acceptances as
are eligible for rediscount or for purchase by Federal reserve
banks under the provisions of this Act, or secured by such
obligations as are eligible for purchase under section 14(b) of
this Act. All such advances shall be made at rates to be
established by such Federal reserve banks, such rates to be
subject to the review and determination of the Board of
Governors of the Federal Reserve System. If any member bank to
which any such advance has been made shall, during the life or
continuance of such advance, and despite an official warning of
the reserve bank of the district or of the Board of Governors
of the Federal Reserve System to the contrary, increase its
outstanding loans secured by collateral in the form of stocks,
bonds, debentures, or other such obligations, or loans made to
members of any organized stock exchange, investment house, or
dealer in securities, upon any obligation, note, or bill,
secured or unsecured, for the purpose of purchasing and/or
carrying stocks, bonds, or other investment securities (except
obligations of the United States) such advance shall be deemed
immediately due and payable, and such member bank shall be
ineligible as a borrower at the reserve bank of the district
under the provisions of this paragraph for such period as the
Board of Governors of the Federal Reserve System shall
determine: Provided, That no temporary carrying or clearance
loans made solely for the purpose of facilitating the purchase
or delivery of securities offered for public subscription shall
be included in the loans referred to in this paragraph.
The discount and rediscount and the purchase and sale by any
Federal reserve bank of any bills receivable and of domestic
and foreign bills of exchange, and of acceptances authorized by
this Act, shall be subject to such restrictions, limitations,
and regulations as may be imposed by the Board of Governors of
the Federal Reserve System. (Omitted from U.S. Code)
That in addition to the powers not vested by law in national
banking associations organized under the laws of the United
States any such association located and doing business in any
place the population of which does not exceed five thousand
inhabitants, as shown by the last preceding decennial census,
may, under such rules and regulations as may be prescribed by
the Comptroller of the Currency, act as the agent for any fire,
life, or other insurance company authorized by the authorities
of the State in which said bank is located to do business in
said State, by soliciting and selling insurance and collecting
premiums on policies issued by such company; and may receive
for services so rendered such fees or commissions as may be
agreed upon between the said association and the insurance
company for which it may act as agent: Provided, however, That
no such bank shall in any case assume or guarantee the payment
of any premium on insurance policies issued through its agency
by its principal: And provided further, That the bank shall not
guarantee the truth of any statement made by an assured in
filing his application for insurance.
Any member bank may accept drafts or bills of exchange drawn
upon it having not more than three months' sight to run,
exclusive of days of grace, drawn under regulations to be
prescribed by the Board of Governors of the Federal Reserve
System by banks or bankers in foreign countries or dependencies
or insular possessions of the United States for the purpose of
furnishing dollar exchange as required by the usages of trade
in the respective countries, dependencies, or insular
possessions. Such drafts or bills may be acquired by Federal
reserve banks in such amounts and subject to such regulations,
restrictions, and limitations as may be prescribed by the Board
of Governors of the Federal Reserve System: Provided, however,
That no member bank shall accept such drafts or bills of
exchange referred to this paragraph for any one bank to an
amount exceeding in the aggregate ten per centum of the paid-up
and unimpaired capital and surplus of the accepting bank unless
the draft or bill of exchange is accompanied by documents
conveying or securing title or by some other adequate security:
Provided further, That no member bank shall accept such drafts
or bills in an amount exceeding at any time the aggregate of
one-half of its paid-up and unimpaired capital and surplus.
(Omitted from U.S. Code)
Subject to such limitations, restrictions and regulations as
the Board of Governors of the Federal Reserve System may
prescribe, any Federal reserve bank may make advances to any
individual, partnership or corporation on the promissory notes
of such individual, partnership or corporation secured by
direct obligations of the United States or by any obligation
which is a direct obligation of, or fully guaranteed as to
principal and interest by, any agency of the United States.
Such advances shall be made for periods not exceeding 90 days
and shall bear interest at rates fixed from time to time by the
Federal reserve bank, subject to the review and determination
of the Board of Governors of the Federal Reserve System.
Subject to such restrictions, limitations, and regulations as
may be imposed by the Board of Governors of the Federal Reserve
System, each Federal Reserve bank may receive deposits from,
discount paper endorsed by, and make advances to any branch or
agency of a foreign bank in the same manner and to the same
extent that it may exercise such powers with respect to a
member bank if such branch or agency is maintaining reserves
with such Reserve bank pursuant to section 7 of the
International Banking Act of 1978. In exercising any such
powers with respect to any such branch or agency, each Federal
Reserve bank shall give due regard to account balances being
maintained by such branch or agency with such Reserve bank and
the proportion of the assets of such branch or agency being
held as reserves under section 7 of the International Banking
Act of 1978. For the purposes of this paragraph, the terms
``branch,''``agency,'' and ``foreign bank'' shall have the same
meanings assigned to them in section 1 of the International
Banking Act of 1978.
* * * * * * *
MINORITY VIEWS
Democrats share the view that the Federal Reserve cannot
have free rein in exercising its emergency lending powers, and
agree that any provision of credit must be broad-based, cannot
be made to an insolvent entity or used for the purpose of
preventing an institution or group of institutions from
entering bankruptcy or otherwise failing, must entail a penalty
rate, and must enclose a high degree of public transparency.
These restrictions are critical to preventing moral hazard--the
risk that institutions will take excessive risks with an
expectation that the Federal Reserve will come to the rescue.
Democrats' support for these reasonable constraints is
precisely why we support the reforms included in the Dodd-Frank
Wall Street Reform and Consumer Protection Act, as well as the
additional restrictions included in the Federal Reserve's final
implementing regulation, which ended the ability for the
Federal Reserve to save individual firms like AIG and Bear
Stearns, as it did in response to the 2008 financial crisis.
To prevent a situation where any firm would be rescued,
Democrats passed the Dodd-Frank Act to establish a mechanism to
provide for the orderly resolution of failing firms, strengthen
the resiliency of the financial sector, and enhance the
supervision and regulation of systemic risks. We believe that
as long as these reforms are not undercut either by
Congressional deregulation or by the Trump Administration, they
will reduce the likelihood that the Federal Reserve's emergency
lending powers will ever be used.
However, reducing the likelihood that emergency lending
will be needed and placing reasonable constraints on the terms
and conditions under which the authority can be used, do not
eliminate the need for emergency lending powers altogether.
Indeed, Democrats view the Federal Reserve's lender-of-last
resort function as a core function of our central bank, and an
authority that is critical to the Federal Reserve's ability to
promote the stability of our financial system.
H.R. 4302 goes too far in curtailing the Federal Reserve's
ability to exercise its emergency lending powers, which would
likely render this critical role unworkable and ineffectual in
a time of crisis--precisely the time when it is needed most.
In particular, we are concerned that requiring Congress to
approve all credit facilities established within 30 days would
effectively make Congress the lender of last resort and put it
in a position of making highly-technical judgments that the
Federal Reserve, as our central bank, was established to do and
is far better equipped to make. According to a statement by
Better Markets, this requirement ``in the context of a fast-
moving, catastrophic financial crisis in the future where
information will be incomplete, ambiguous and continually
changing, will almost certainly result in political paralysis
and cripple the Fed's ability to respond to emergencies.''
Furthermore, the provisions in the bill that require
emergency credit facilities to be approved by a super-majority
of the Federal Open Market Committee and all relevant Federal
banking regulators would erect further barriers to a program's
timely deployment.
The penalty rate called for in the bill is convoluted and
may be too opaque and punitive to make the Fed's emergency
lending effective. Currently, the Federal Reserve's final
emergency lending rule outlines a number of factors that the
Board will now take into account when setting a penalty rate,
and the adequacy of these factors should be carefully
considered prior to enacting a less coherent penalty formula.
For example, these factors include the condition of the
affected markets and the financial system generally, the
historical rate of interest for loans of comparable terms and
maturity during normal times, the purpose of the program or
facility, the risk of repayment, the collateral supporting the
credit and the duration, terms and amount of credit. At a
legislative hearing held by the Subcommittee on Monetary Policy
and Trade to examine this proposal, Dr. Jared Bernstein
testified that, ``the prescribed formula could return an overly
punitive rate that would potentially undermine the Fed's lender
of last resort function.''
For these reasons we oppose the bill.
Maxine Waters.
Nydia M. Velazquez.
Vincente Gonzalez (TX).
Keith Ellison.
Wm. Lacy Clay.
Daniel T. Kildee.
Stephen F. Lynch.
Joyce Beatty.
Al Green.
Michael E. Capuano.
Carolyn B. Maloney.
Ruben J. Kihuen.
[all]